In a high-interest-rate environment, investors need to be selective when it comes to financial stocks. There are many choices out there, and PayPal (NASDAQ:PYPL) stock simply isn’t the best one. When all is said and done, there’s a better alternative in the fintech field.
Don’t get the wrong idea. PayPal may succeed in 2024, but be sure to learn all of the relevant facts if you’re considering PayPal stock now. Then, compare and contrast PayPal with another well-known fintech firm and I’m sure you’ll see a big difference.
PYPL Stock Has Been a Poor Performer
As you’re probably aware, PYPL stock has performed poorly in 2023 so far. The year’s not over yet, but PayPal’s shareholders aren’t likely to end 2023 in the green.
In contrast, SoFi Technologies (NASDAQ:SOFI) stock started off the year at $4.50 and is up substantially from there. Both companies are dealing with the same challenging macro environment. So, why have investors chosen SoFi over PayPal?
First of all, PayPal’s third-quarter 2023 revenue increased 8% year over year, which isn’t terrible but also isn’t anything to write home about. Meanwhile, SoFi grew its revenue 27% year over year.
Sure, PayPal’s management might brag that the company’s total payment volume (TPV) increased 13%. But then, SoFi’s lending segment total origination volume increased 48%, student loan volume more than doubled and home loan volume grew 64%.
PayPal is a direct competitor of Apple (NASDAQ:AAPL), Block (NYSE:SQ) and Stripe. SoFi Technologies might overlap with those companies in some respects, but it’s not mainly a payment processor. PayPal has to face constant competition from well-known rivals seeking to steal the company’s market share.
Cryptocurrency Exposure Adds Risk to PayPal Stock
Moreover, not every PayPal stock investor wants direct exposure to cryptocurrency. Some investors might not even be aware of PayPal’s forays into crypto.
PayPal allows its users to buy and sell cryptocurrency, and the company has its own stablecoin. It’s fine for a business to branch out, but crypto certainly isn’t PayPal “wheelhouse” or area of expertise. Hence, there’s an element of risk here.
SoFi Technologies, on the other hand, recently disclosed that the company is exiting the cryptocurrency business. That’s a smart move as SoFi seeks to establish a reputation as a legitimate bank in the wake of the FTX collapse.
PayPal might or might fail as a cryptocurrency purveyor. As an investor, are you prepared to handle the volatility of the crypto market? SoFi Technologies is choosing to sidestep crypto’s issues, and this could be a prudent strategy.
Choose SOFI Stock Over PYPL Stock
SoFi Technologies is growing faster than PayPal in certain important respects. In addition, not every investor will want to immerse themselves in the world of cryptocurrency, so they should probably avoid PayPal stock.
The good news is that there’s a better alternative to PYPL stock. I recommend SOFI stock because SoFi Technologies is establishing itself as a bona fide bank and a go-to source of personal finance solutions. So, there’s no urgency to invest in PayPal now when you can instead consider a share position in SoFi.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
