PayPal Vs Block Stock, Which Is Best?

The global fintech market is projected to reach $608.35 billion by 2029, growing at a CAGR of greater than 14%.

Companies such as PayPal (NASDAQ: PYPL), Block (NYSE:SQ), and Robinhood (NASDAQ:HOOD) have played a part in disrupting the fintech landscape, but which financial tools and platforms are best? We compare PayPal vs Block as well as Robinhood to find out which stands head and shoulders above the pack.

PayPal 

PayPal is legendary when it comes to digital payment providers and it has been since digital payments were born. This is the company that first made online financial transactions possible in the late 1990s, just as the internet began to gain widespread adoption. It was famously formed by Peter Thiel, Elon Musk and other tech titans.

Today, PayPal can brag about its massive network of financial services that are capable of connecting people to each other and to businesses around the world. The fintech platform makes it possible to buy just about anything from almost anywhere, whether that is crafts from artisans in remote villages or services from a local professional.

The PayPal platform has a stunning 426 million active consumer and merchant accounts, and its total payment volume stands at an astonishing $1.53 trillion. Those numbers put PayPal in the top five by size and by market share when it comes to digital payment companies. 

At an organizational level, PayPal is focusing its attention on improving its traditional payment service, but that’s not all. PayPal is also moving into new geographies and developing new revenue streams. The company’s geographic expansion plans are aimed at both developed and developing countries because PayPal wants to broaden its market base in a move to ultimately increase revenues.

Management clearly has no intention of resting on the laurels of past successes, and these steps show that the company is committed to cementing its position as the leading market share provider.

Customers have enthusiastically embraced new features like the popular Buy Now Pay Later option. So too have they expressed a keen interest in PayPal’s cryptocurrency trading and savings products. Combined, these tools make PayPal a top choice for a diverse mix of consumers worldwide. 

PayPal doesn’t shy away from growing inorganically too, via acquisition. Some recent examples include the decision to buy Honey Science Corporation and the Japanese BNPL platform Paidy, both of which tack on to PayPal’s existing offerings. Better still, these moves serve to enhance PayPal’s ecosystem and improve the experiences of PayPal customers around the world.

In addition, PayPal’s focus on its merchant services portfolio of products has increased the overall volume of transactions flowing through the PayPal platform. Examples of merchant services include selling, invoicing, and payment processing solutions in order to make it easier for small businesses and entrepreneurs to tap into online markets.

The purchase of Venmo by PayPal has been a win all around with tremendous benefits for consumers and shareholders alike. Through Venmo, PayPal has profited from the popularity of simple, convenient peer-to-peer (P2P) payments. 

The result of all these initiatives is to grow the top line at an annual rate of 14% over the past five years. The growth reflects PayPal’s strong branding and the effectiveness of its efforts to attract customers and keep them coming back.

With all that said, the share price has been somewhat uninspiring with a rather disappointing 21% decline over the past twelve months.

Nonetheless, analysts have indicated that they expect the stock to surge by an impressive 30% or more over the next 12 months or so. Of the 40 analysts who evaluated the company, 15 recommend buying PayPal stock while 24 rate it as a “Hold.”

Block

Block started out as a digital payment service called Square but its successful expansion into other areas of financial technology, specifically the blockchain, inspired the new name. 

Block’s original point-of-sale system has metamorphosed into a collection of practical tools for running a business, whether that’s inventory management, employee scheduling, or customer relations.

Compared to the competition, Block is widely regarded as offering a more unified and effective platform to integrate all the services it offers for businesses.

One of Block’s huge successes has been Cash App, which contributes substantial revenues to the organization’s top line. This application was quickly adopted by users and ignited Block’s financials.

Block generated net revenues of $5.96 billion for the most recent quarter, representing a rise of 19% versus the same period a year prior. This fast growth is attributable across the board in all segments of the business, including the Cash App and Block Ecosystem.

The strong balance sheet emboldened management to embark on a number of acquisitions. For instance, the Afterpay acquisition, a by now, pay later (BNPL) platform provider, broadened the company’s payment options to customers and sellers. 

Block is also doubling down on the development of products in buzzworthy areas like blockchain and DeFi. The company has specialized in delivering open-source platforms to the financial sector. These initiatives have the potential to spur radical innovations in the fintech industry as a whole.

Other efforts, such as expanding into international markets, are also contributing to Block’s growth. As it cements its position in the US markets, it makes all the sense in the world to add to the top line through international growth.

In spite of its strong business model, Block share price has been disappointing over the past twelve months and registered a 19.8% correction. The good news, though, is that the stock appears to have a considerable upside over the coming 12 months if analysts are to be believed.

The median target price from analyst forecasts is a lofty $90.70 per share. Still, on a valuation basis, Block isn’t cheap and trades at a relatively high 19.21x forward non-GAAP earnings.

Sentiment still remains upbeat though with 27 of 39 analysts recommended the stock as a Buy.

Robinhood

Robinhood is famous for its commission-free stock trading platform, which significantly disrupted conventional brokerages.

Beginner investors in particular flocked to it in order to buy shares, exchange-traded funds, options, and digital currencies via its easy-to-use interface. More recently, Robinhood has entered the retirement market with a new product, Robinhood Retirement.

The next gen trading platform has also been acquisitive. For example, management annoucced a plan to acquire Pluto Capital, an innovative AI-powered investment research platform. This purchase aligns with the company’s plans to stay at the forefront of the trading tools industry.

The product successes have translated to enormous financial success. Robinhood’s revenues increased at a respectable 14.7% CAGR over the past three years.

Funded Customers totaled 24.1 million at the end of May, representing an additional 960,000 year-over-year. Better still, the Assets Under Custody (AUC) figure came in at $135.0 billion, up a whopping 65% year-over-year.

While Robinhood stock has surged more than 100% over the past year, a win by any measure, analysts expect to see a decline of around 3% in the next 12 months.

The stock currently trades at 28.77x forward non-GAAP earnings, which is substantially higher than industry peers.

Current shareholders were discouraged by analysts’ reports, but it seems most aren’t ready to sell quite yet.

For those that don’t already have Robinhood in their portfolios, the stock could be worth adding to watchlists, given that 8 out of 14 analysts have rated Robinhood stock a Hold.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.