In a high interest rate environment, investors must be selective about financial stocks. There are many options out there, and PayPal (NASDAQ:PYPL) stock is just not the best. Ultimately, there is a better alternative in the fintech space.
Don’t get me wrong. PayPal could be successful in 2024, but be sure to understand all the relevant facts if you’re considering PayPal stock now. Then compare PayPal with any other well-known fintech company and I am sure you will notice a big difference.
PYPL stock has performed poorly
As you probably know, PYPL stock has performed poorly so far in 2023. The year isn’t over yet, but PayPal shareholders probably won’t end 2023 in the green.
In contrast, SoFi Technologies (NASDAQ:SOFI) The stock started the year at $4.50 and has risen significantly from then on. Both companies face the same challenging macroeconomic environment. Why did investors choose SoFi over PayPal?
First, PayPal’s revenue increased 8% year-over-year in the third quarter of 2023, which isn’t bad, but it’s nothing special either. Meanwhile, SoFi grew its revenue 27% year over year.
Surely PayPal’s management could boast that the company’s total payment volume (TPV) increased by 13%. But then total origination volume in SoFi’s lending segment increased 48%, student loan volume doubled, and home loan volume grew 64%.
PayPal is a direct competitor of Apple (NASDAQ:AAPL), block (NYSE:square) And stripes. SoFi Technologies may have some overlap with these companies, but it is not primarily a payment processor. PayPal is in constant competition with well-known competitors who want to steal market share from the company.
The risk of cryptocurrencies increases the risk for PayPal shares
Additionally, not every PayPal stock investor wants to invest directly in the cryptocurrency. Some investors may not even be aware of PayPal’s forays into the crypto world.
PayPal allows its users to buy and sell cryptocurrencies and the company has its own stablecoin. It’s fine for a company to branch out, but crypto is certainly not PayPal’s “wheelhouse” or area of expertise. Therefore, there is some risk here.
SoFi Technologies, on the other hand, recently announced that the company is exiting the cryptocurrency business. This is a smart move as SoFi looks to build a reputation as a reputable bank following the collapse of FTX.
PayPal could or could fail as a cryptocurrency provider. As an investor, are you ready to deal with the volatility of the crypto market? SoFi Technologies is choosing to bypass cryptocurrency’s problems and this could be a prudent strategy.
Choose SOFI stock over PYPL stock
SoFi Technologies is growing faster than PayPal in certain key ways. Additionally, not every investor will want to delve into the world of cryptocurrencies, which is why they should probably avoid PayPal stocks.
The good news is that there is a better alternative to PYPL stock. I recommend SOFI stock because SoFi Technologies is establishing itself as a reputable bank and destination for personal finance solutions. So there’s no urgency to invest in PayPal now when you can consider an equity position in SoFi instead.
At the time of publication: David Moadel did not have, directly or indirectly, any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to those of InvestorPlace.com Publishing Guidelines.