Better Fintech Stock: PayPal vs. SoFi

PayPal Holdings (NASDAQ: PYPL), once the king of digital finance stocks, now struggles amid rising competition. After its own multiyear slump, SoFi Technologies (NASDAQ: SOFI) has now become a Wall Street darling among fintech stocks.

However, despite its problems, PayPal is undervalued while SoFi trades at a premium compared to its fintech peers. So, among the two, which should you buy?

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PayPal is cheap, but a rebound may take time

PayPal Holdings trades for less than 8 times forward earnings. That not only makes it cheaper than most fintech stocks, but also puts PayPal at a discount to most major bank stocks at this valuation.

However, the low valuation comes with major caveats. For one, the company just released horrendous quarterly results, with revenue and adjusted earnings fell short of expectations. Even PayPal's branded checkout business, a key growth focus for the company, is experiencing a flatlining of growth. In the prior year's quarter, this segment reported 6% revenue growth, but this quarter, growth came in at just 1%. In response to earnings, shares fell by over 20%.

Also, don't expect any sort of rapid recovery. With PayPal's 2026 guidance calling for either a "low-single digit decline" or "slightly positive" earnings growth, the market isn't exactly going to be rushing in to rerate this stock at a higher multiple.

And PayPal is replacing its CEO. Alex Chriss is out, and former HP CEO Enrique Lores is taking over the helm. Among other things, this C-suite change signals that PayPal's turnaround efforts are back to the drawing board.

SoFi could stay a fintech rising star, despite recent pullback

In contrast to fading PayPal, SoFi is a rising star. Its shares are up 41% over the past year, thanks to a spate of strong quarterly results. SoFi has pulled back since last month's earnings release, but still trades at a rich 32 times forward earnings.

While not the priciest fintech out there, it does trade at a premium to many other major fintech stocks, including Upstart and Block, both of which trade for under 20 times forward earnings.

Although SoFi has pulled back after earnings failed to meet market expectations, don't assume the growth story behind SoFi has completely disappeared. SoFi ad impressive 40% year-over-year revenue growth and 160% earnings growth in the fourth quarter -- it just didn't do as well as analysts predicted.

In the years ahead, management expects revenue growth of over 30% and earnings growth of around 38% to 42%. If SoFi lives up to this, shares could sustain their rich valuation, rising in line with increased earnings.

What's the better buy?

Recent developments suggest investors should sell PayPal and buy SoFi. However, don't rule out the opposite proving true down the road. Given PayPal's low valuation, new catalysts, such as a potential sale of all or part of the company, could emerge.

Conversely, SoFi could always hit a growth slump down the road. If this occurs sooner than expected, it may lead to severe multiple compression for shares.

Nevertheless, I'd wait for positive news or a new turnaround plan to emerge before buying PayPal. And while SoFi is a buy today, keep an eye out for anything that could threaten the growth story.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block, HP, PayPal, and Upstart. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2026 $65 calls on PayPal. The Motley Fool has a disclosure policy.