Paypal vs Block (SQ): The Best Financial Stock for 2022
Do you remember the first time you heard the word “Fintech”? When I first heard the term, I thought it was some rare Pokémon or an item on the Japanese restaurant menu. It turns out, fintech is neither of those.
Short for “financial technology”, fintech is the term that describes any sort of technology that helps consumers or businesses deliver financial services in newer, faster ways than traditionally were available. Think of investing apps like Robinhood, or even cryptocurrency exchange apps like Binance – these are examples of fintech.
In this guide we will be analyzing 2 fintech companies- PayPal (Ticker: PYPL) and Block (Ticker: SQ).
What does PayPal do?
PayPal enables you to swiftly send or request money to anyone in the world and make easy online payments without entering your credit card/shipping information to the platform you purchase on. The company offers buyer protection, so when you purchase something through PayPal, you have the company’s backing that you get what you paid for otherwise you get a full refund if something goes wrong.
They are also the parent company of Venmo – a peer-to-peer transaction platform where you can quickly send and receive money to friends and family within the U.S. PayPal also offers other services such as debit cards for payments, credit card readers for small merchants, and lines of credit.
What does Block do?
Block, formerly known as Square, provides an integrated ecosystem of commerce solutions, business software, and banking services to both businesses and consumers. Like its name, the company is composed of 5 building blocks with the stated purpose of expanding access to the economy- Square, Cash app, Tidal, Spiral, and TBD54566975.
Their business model is to cover all your financial needs; point-of-sale payment processing hardware, a convenient, quick-access money transfer application, a bitcoin/stock investment platform, loans- The company is an all-in-one inclusive platform for everything finance-related.
Block vs Paypal: Financial Data Analysis
SQ vs PYPL Revenue Analysis
Let’s begin our analysis by examining the revenue each company has generated over the past couple of years. This will signal to us the market demand for each company’s offering:
You can check SQ vs Pypl revenue chart, or make your own research with Jika.io free comparison tool –
As you can see from the PYPL vs SQ revenue chart, PayPal has consistently been yielding higher revenue than Block over time. This is what we would expect, as PayPal is a significantly bigger company than Block. PayPal has 426 million active users, while Block currently has 36 million monthly active users.
Notice the drop in Block revenue beginning in March 2021. The reason for this drop is that the company’s revenue is to some degree correlated with the price of bitcoin, and the price of bitcoin as well has seen a drop around the same time, falling from 61,823$ in March 2021 to 41,840 in September 2021.
A large degree of Block's revenue is generated from bitcoin purchases on their Cash App; Block collects a 2% fee from these cryptocurrency exchanges. When the price of bitcoin falls, so does the company’s revenue. Users can also purchase bitcoin with PayPal, but most of PayPal’s revenue is from payment transaction fees in US dollars- not bitcoin.
The takeaway from this is that PayPal seems to be a “safer” investment. The company is more established, as evidenced by its gigantic consumer base and consistent revenue growth rates over time. In contrast, Block’s revenue is not as large as PayPal’s, and is correlated with the price of bitcoin-which itself is highly volatile these days.
SQ vs PYPL Gross Profit Margin Analysis
This Pypl vs Sq stock chart displays each company’s gross profit margin since March 2019. Gross profit margin tells us how efficient the company is at generating profit for every dollar of cost involved. To analyze gross profit margin and many other metrics of different stocks, visit Jika.io’s free Analyze Tool today.
As you can see from the above chart, PayPal shows an impressive gross profit margin range, fluctuating between 25% to 50% over the past 3 years. In comparison, Block as well has seen a healthy gross profit margin- but less impressive than PayPal's. The company’s gross profit margin is starting to make a comeback, and as of September 2021 stands at 30%. This means that each company’s revenue far exceeds the cost to produce that revenue.
SQ vs PYPL Price-to-Sales ratio Analysis
Both companies display relatively high price-to-sales ratios, as shown from the SQ vs Pypl graph above. This metric compares the stock price to revenue and signals how much investors are willing to pay per dollar of sales for a stock. The main takeaway from the above graph is “proceed with caution”. As both companies display relatively high P/S ratios, it may signal that each stock is approaching overvalued territory in the stock market.
Sometimes its important to be your own stock advisor. Start analyzing stocks data with Jika.io Free tools –
PayPal or Block: What are the differences
There is a key difference between PayPal and Block. Block’s business model immerses the user with all the necessary financial tools to run a business and may completely disrupt the payments market as we know it.
PayPal’s business model is built on top of credit card networks that work with banks to complete transactions. PayPal facilitates the payment process; Block has created its own payment processing ecosystem.
Block may have far greater potential to make an impact in the payments industry if more people join their platform. If more people join their platform, we may see an increase in their gross profit margin as the company becomes more efficient at turning revenue to profit.
Paypal and Block Position in the Fintech Industry
It pays to have a watchful eye on both Block and PayPal- each stock has experienced a tremendous pullback in response to the Fed’s plan to hike interest rates, and both are currently being traded at their respective 52-week lows. Both companies demonstrate strong gross profit margins and are part of a modern and disruptive industry that is changing the way we conduct payments.
It is also important to note, that this space is highly competitive, as many other fintech companies are emerging with their own method of payment processing. While some would claim that Paypal and Block are the best stock What will ultimately determine the success of each company is if it can expand its consumer base to increase profitability and drive revenue.
Should You Buy Block Stock?
Although Block is a riskier investment, there is more potential for growth as the company continues to innovate and develop its financial ecosystem.
Block only operates within the U.S, while PayPal operates internationally- if Block can successfully expand to the global market, we may see very high profitability growth in the future. And if bitcoin rises in valuation, so will Block. Buy or sell? Its really a question of whether you are willing to take the risk.
Is PayPal a Good Stock to Buy?
PayPal has a proven track record of earnings and sales growth. The company has processed an astounding 1.25 trillion dollars in total payment volume FYE 2021 and is the market leader in online payment solutions. PayPal’s main challenge is protecting a competitive edge in an industry where many other competitors are entering with even lower transaction fees and monthly fees. This is a challenge Block worries less about, since they offer a unique financial ecosystem that’s harder to imitate.
Which Fintech to Invest In?
As expressed in this article, If you are willing to take on extra risk for a higher price target potential, invest in Block. If you prefer a safer, more established company with less potential, choose PayPal. If neither of those impressed you, you can find more Fintech companies using Jika.io free Stock Screener.
Leave a Reply