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One of the most important trends that has shaped the economy during the past decade has happened at the intersection of financial services and technology. Two companies, Block (NYSE: XYZ) and PayPal (NASDAQ: PYPL), are among those enterprises leading the charge.
Shares of these businesses haven't quite panned out for investors. Block stock is 80% off its record high (as of April 9), while PayPal's is trading 79% below its peak. Perhaps better days are on the horizon.
Between these two fintech stocks, which is the better one to buy right now?
The case for Block
Block operates two separate ecosystems that continue to resonate strongly with customers. Its Square segment provides merchants with hardware, software, and financial services to help them accept and make customer orders and accept payments. Cash App, which targets individuals, is a personal finance platform that is becoming a banking substitute for households making less than $150,000 per year.
The business hasn't struggled when it comes to growth. Overall, Block reported gross profit of $8.9 billion in 2024, 18% higher than the year before and double the figure of 2021. Square is doing a good job of increasing its gross payment volume. Cash App, which is growing faster than Square, is seeing robust demand for small loans.
Combined, Square and Cash App have a $205 billion total addressable market in front of them. Based on 2024 data, they have only tapped less than 5% of the leadership team's estimated opportunity.
Although growth has historically been management's top priority, Block is now starting to show that it can generate substantial earnings. Efforts to drive efficiencies are bearing fruit. Operating income was $892 million last year, with healthy growth forecasted by the Wall Street analyst community.
The shares trade significantly below their all-time high, probably because growth has slowed from a few years ago. The stock can be bought today at a forward price-to-earnings (P/E) ratio of 12.8. That's a good deal that might be too hard to ignore.
The case for PayPal
PayPal, a leader in online payments, is showing that product innovation is still a focus among executives. The business has introduced Fastlane (one-click checkout), Smart Receipts (with AI-powered purchase recommendations), and CashPass cash-back offers, for example, to create a more appealing platform. PayPal even entered the advertising sector, using the immense amount of data it has on purchasing behavior to help merchants target shoppers.
Investors shouldn't overlook PayPal's brand recognition. It's known for convenience and security that users have come to trust. The platform handled a whopping $1.7 trillion in payment volume last year. And as a two-sided ecosystem, one that has 434 million active user accounts, PayPal benefits from a powerful network effect.