Better Growth Stock: PayPal vs. SoFi Technologies

Companies using technology to disrupt the traditional financial services sector stand to capitalize on a significant growth opportunity. PayPal (NASDAQ: PYPL) and SoFi Technologies (NASDAQ: SOFI) are recognized as fintech leaders that have found success in carving out distinct niches within the evolving landscape.

Despite their volatile stock prices during the past year, both companies' strong product innovation and ongoing expansion efforts position them to reward shareholders over the long run.

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Let's discuss which of these fintech growth stocks is the better buy for your portfolio right now.

Image source: Getty Images.

The case for PayPal stock

With a history spanning more than two decades, PayPal pioneered online payment processing as an early disruptor to legacy banking systems. Today, the company facilitates transactions for 436 million active customers in more than 200 countries. PayPal has evolved by focusing on differentiated and value-added solutions to drive profitability rather than emphasizing user growth and low-margin activities. The strategy appears to be working.

In the recently reported first quarter, even as the number of total payment transactions declined by 7% year over year, the company's key performance metric of total payment volume (TPV) climbed by 3% year over year, generating a 7% increase in transaction margin.

Branded checkout, representing payment experiences where PayPal's brand or the Venmo platform are central to the transaction, has been a key part of the TPV growth. PayPal is also seeing traction in its market with its merchant-oriented payment service provider (PSP) offerings. Even more impressive was the 23% increase in adjusted earnings per share (EPS) compared to the prior-year quarter.

Management expects the trends to continue, targeting full-year transaction margin growth between 4% and 5%, alongside a 6% to 10% increase in adjusted EPS over 2024. Where PayPal shines as a growth stock, and part of its allure as an investment opportunity next to SoFi Technologies, is its attractive valuation. Shares of PayPal trade at a forward price-to-earnings (P/E) ratio of just 13 based on analysts' average estimated 2025 EPS. That's well below SoFi's forward P/E of 44.

Investors confident in PayPal's ability to further consolidate its payments market share have ample reasons to buy and hold the stock for the long run.

PYPL PE Ratio (Forward) data by YCharts.

The case for SoFi Technologies stock

SoFi Technology's $14 billion market capitalization makes it smaller compared to PayPal's $65 billion valuation, yet it offers faster growth in a more lucrative fintech segment.

The company stands out with a comprehensive approach to personal finance, turning its expertise in lending products -- such as personal loans and mortgages -- into a one-stop shop for financial services. SoFi's ability to cross-sell to its 10.9 million-strong membership base across a broader range of products, including banking accounts, credit cards, and investing options, has translated into a rapidly expanding and diversified technology platform.

In the first quarter, net revenue surged by 33% from a year earlier in what management described as a "tremendous start to 2025." Perhaps the biggest development for SoFi is its ongoing diversification beyond lending products into more fee-based financial services, which now represent 41% of the business, up from 37% last year. This is important as it supports more durable earnings and high-quality cash flow, compared to the credit risk exposure from its loan portfolio. Indeed, profitability is accelerating, with management targeting full-year adjusted EPS between $0.27 and $0.28, nearly double the $0.15 result in 2024.

Ultimately, SoFi's outlook helps justify the valuation premium its shares command. Investors who believe SoFi represents the future of banking and remains in the early stages of fulfilling its platform potential will be hard-pressed to find a better fintech growth stock to own.

Decision time: The edge to SoFi

Although I predict shares of PayPal and SoFi Technologies will both climb higher during the next year and beyond, my choice for the better growth stock is clear. SoFi's combination of rapid platform membership growth and earnings momentum should allow its stock to outperform in a resilient macroeconomic environment. A few more quarters with financial results exceeding expectations could be the key for SoFi stock to reclaim its previous highs, making it a compelling buy-the-dip opportunity for investors to consider adding to diversified portfolios.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.