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PYPL vs. UPST: Which Fintech Disruptor Is the Smarter Investment?
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Key Takeaways
PYPL is transforming into a full-service platform, with BNPL and Venmo driving strong Q1 performance.
UPST automated 92% of loans in Q1 2025, with originations expanding into auto, HELOCs and more.
PayPal's partnerships and international push contrast with Upstart's rapid growth but thinner early margins.
In the rapidly evolving world of fintech, investors are constantly searching for companies with innovative models and sustainable growth potential. Two such players — PayPal (PYPL - Free Report) and Upstart Holdings (UPST - Free Report) — have emerged as notable disruptors, albeit in very different arenas.
PayPal, a pioneer in digital payments, is transforming into a full-spectrum commerce platform, while Upstart is shaking up the consumer lending space with its AI-driven credit underwriting. Yet, as 2025 unfolds, both companies face their share of opportunities and obstacles.
PayPal is down nearly 14% year to date amid competitive pressures, while Upstart has soared more than 20% in the same period, thanks to its rapid product diversification and technological edge. But the key question for investors is: Which fintech is better equipped to deliver long-term portfolio value amid rising macro uncertainty and sector-wide disruption?
Let’s weigh the pros and cons of each to find out which deserves a spot in your portfolio.
The Case for PayPal
PayPal’s stock underperformance so far in the year masks a deeper story of strategic reinvention. Despite stiff competition from peers, PayPal is pushing forward with a multi-pronged transformation. The company is transitioning from a transactional payment provider to a holistic commerce partner by consolidating its services into a single PayPal platform to harness the full potential of its two-sided network, supporting both consumers and merchants. Focusing on improving user experience, enhancing merchant relationships and expanding international capabilities are the key moves that could unlock long-term growth.
Encouragingly, core operating metrics have shown resilience. Transaction margin dollars rose 7% year over year in the first quarter of 2025, and Venmo revenues surged 20%, contributing 18% to total payment volume. Additionally, PayPal’s Buy Now, Pay Later (“BNPL”) segment continues to shine. Volumes rose more than 20% in the first quarter, and monthly active accounts increased 18% year over year. BNPL users spend 33% more and make 17% more transactions, on average, highlighting its effectiveness in driving consumer engagement.
International expansion is also underway, with NFC rollouts in Germany and the U.K. aiming to replicate U.S. omnichannel success. PayPal’s expanding partnerships with Coinbase, Amazon and Shopify are boosting its growth outlook. A deeper tie-up with Coinbase is also advancing the adoption of its PYUSD stablecoin.
However, all this innovation comes at a cost. Investments in platform modernization, product rollouts and global expansion are likely to pressure margins in the short term. It’s also under competitive strain from Visa, Mastercard, Apple Pay and others. Regulatory risks like potential tariffs or data access fees, such as JPMorgan’s fintech initiative, add uncertainty.
The Case for Upstart
Upstart has enjoyed an impressive run in 2025, well ahead of most of its peers in the digital lending space. At its core, Upstart differentiates itself by using artificial intelligence to disrupt credit underwriting, replacing traditional FICO-based assessments with models that factor in education, employment and broader financial behavior. Its AI systems enabled full automation of 92% of loans in the first quarter of 2025, while conversion rates rose from 14% to 19% year over year, underscoring both scalability and operational efficiency.
Moreover, Upstart is rapidly expanding beyond personal loans into auto refinancing, HELOCs and small-dollar loans. Auto originations jumped 42% sequentially, and HELOCs surged 52%, creating new revenue channels. Its marketplace model has diversified funding across banks, credit unions and private credit providers, now with more than 50% of volume backed by committed capital. With 32% of originations now from super-prime borrowers, credit quality is on an upswing.
Still, Upstart’s journey isn’t without headwinds. The expanding focus on super-prime borrowers lowers take rates due to heightened competition. Margins in newer products like HELOC and auto lending are expected to mature over time, with initial take rates being modest due to early-stage scaling. Macroeconomic uncertainty and trade tensions add to the company’s woes.
How Do Zacks Estimates Compare for PYPL & UPST?
The Zacks Consensus Estimate for PayPal’s 2025 sales and EPS implies a year-over-year increase of 2.9% and 9.5%, respectively. EPS estimates have been trending northward over the past month.
Image Source: Zacks Investment Research
Meanwhile, the consensus estimate for Upstart’s 2025 sales implies a year-over-year rise of 59.46%. EPS estimates have been trending northward over the past month.
Image Source: Zacks Investment Research
Valuation: PYPL vs. UPST
From a valuation perspective, we note that PayPal shares are trading cheap, as suggested by the Value Score of B. However, Upstart shares are currently overvalued, as implied by the Value Score of F.
In terms of forward 12-month Price/Sales (P/S), PYPL stock is trading at 2.1X, below its three-year median, while Upstart is currently trading at 6.03X, which is well ahead of its three-year median.
Image Source: Zacks Investment Research
Price Performance: PYPL vs. UPST
Over the past month, shares of UPST have outperformed PayPal and the S&P 500 composite.
Image Source: Zacks Investment Research
Conclusion
Both PayPal and Upstart bring unique strengths to the table. Upstart's AI-centric approach to lending has ignited rapid growth and innovation, carving out a niche in consumer credit, but it also comes with heightened risk and uncertainty. When it comes to portfolio inclusion in today’s uncertain environment, PayPal’s diversified growth drivers, strong execution and evolving partner ecosystem give it the edge.
While Upstart shows promise, PayPal anchors its fintech credentials on a mature, global payment infrastructure, an expanding product suite and a strong brand. Despite short-term challenges, PayPal's stability, scale, and strategic evolution make it a more balanced and reliable fintech pick for investors seeking resilient growth in their portfolios.
Image: Bigstock
PYPL vs. UPST: Which Fintech Disruptor Is the Smarter Investment?
Key Takeaways
In the rapidly evolving world of fintech, investors are constantly searching for companies with innovative models and sustainable growth potential. Two such players — PayPal (PYPL - Free Report) and Upstart Holdings (UPST - Free Report) — have emerged as notable disruptors, albeit in very different arenas.
PayPal, a pioneer in digital payments, is transforming into a full-spectrum commerce platform, while Upstart is shaking up the consumer lending space with its AI-driven credit underwriting. Yet, as 2025 unfolds, both companies face their share of opportunities and obstacles.
PayPal is down nearly 14% year to date amid competitive pressures, while Upstart has soared more than 20% in the same period, thanks to its rapid product diversification and technological edge. But the key question for investors is: Which fintech is better equipped to deliver long-term portfolio value amid rising macro uncertainty and sector-wide disruption?
Let’s weigh the pros and cons of each to find out which deserves a spot in your portfolio.
The Case for PayPal
PayPal’s stock underperformance so far in the year masks a deeper story of strategic reinvention. Despite stiff competition from peers, PayPal is pushing forward with a multi-pronged transformation. The company is transitioning from a transactional payment provider to a holistic commerce partner by consolidating its services into a single PayPal platform to harness the full potential of its two-sided network, supporting both consumers and merchants. Focusing on improving user experience, enhancing merchant relationships and expanding international capabilities are the key moves that could unlock long-term growth.
Encouragingly, core operating metrics have shown resilience. Transaction margin dollars rose 7% year over year in the first quarter of 2025, and Venmo revenues surged 20%, contributing 18% to total payment volume. Additionally, PayPal’s Buy Now, Pay Later (“BNPL”) segment continues to shine. Volumes rose more than 20% in the first quarter, and monthly active accounts increased 18% year over year. BNPL users spend 33% more and make 17% more transactions, on average, highlighting its effectiveness in driving consumer engagement.
International expansion is also underway, with NFC rollouts in Germany and the U.K. aiming to replicate U.S. omnichannel success. PayPal’s expanding partnerships with Coinbase, Amazon and Shopify are boosting its growth outlook. A deeper tie-up with Coinbase is also advancing the adoption of its PYUSD stablecoin.
However, all this innovation comes at a cost. Investments in platform modernization, product rollouts and global expansion are likely to pressure margins in the short term. It’s also under competitive strain from Visa, Mastercard, Apple Pay and others. Regulatory risks like potential tariffs or data access fees, such as JPMorgan’s fintech initiative, add uncertainty.
The Case for Upstart
Upstart has enjoyed an impressive run in 2025, well ahead of most of its peers in the digital lending space. At its core, Upstart differentiates itself by using artificial intelligence to disrupt credit underwriting, replacing traditional FICO-based assessments with models that factor in education, employment and broader financial behavior. Its AI systems enabled full automation of 92% of loans in the first quarter of 2025, while conversion rates rose from 14% to 19% year over year, underscoring both scalability and operational efficiency.
Moreover, Upstart is rapidly expanding beyond personal loans into auto refinancing, HELOCs and small-dollar loans. Auto originations jumped 42% sequentially, and HELOCs surged 52%, creating new revenue channels. Its marketplace model has diversified funding across banks, credit unions and private credit providers, now with more than 50% of volume backed by committed capital. With 32% of originations now from super-prime borrowers, credit quality is on an upswing.
Still, Upstart’s journey isn’t without headwinds. The expanding focus on super-prime borrowers lowers take rates due to heightened competition. Margins in newer products like HELOC and auto lending are expected to mature over time, with initial take rates being modest due to early-stage scaling. Macroeconomic uncertainty and trade tensions add to the company’s woes.
How Do Zacks Estimates Compare for PYPL & UPST?
The Zacks Consensus Estimate for PayPal’s 2025 sales and EPS implies a year-over-year increase of 2.9% and 9.5%, respectively. EPS estimates have been trending northward over the past month.
Image Source: Zacks Investment Research
Meanwhile, the consensus estimate for Upstart’s 2025 sales implies a year-over-year rise of 59.46%. EPS estimates have been trending northward over the past month.
Image Source: Zacks Investment Research
Valuation: PYPL vs. UPST
From a valuation perspective, we note that PayPal shares are trading cheap, as suggested by the Value Score of B. However, Upstart shares are currently overvalued, as implied by the Value Score of F.
In terms of forward 12-month Price/Sales (P/S), PYPL stock is trading at 2.1X, below its three-year median, while Upstart is currently trading at 6.03X, which is well ahead of its three-year median.
Image Source: Zacks Investment Research
Price Performance: PYPL vs. UPST
Over the past month, shares of UPST have outperformed PayPal and the S&P 500 composite.
Image Source: Zacks Investment Research
Conclusion
Both PayPal and Upstart bring unique strengths to the table. Upstart's AI-centric approach to lending has ignited rapid growth and innovation, carving out a niche in consumer credit, but it also comes with heightened risk and uncertainty. When it comes to portfolio inclusion in today’s uncertain environment, PayPal’s diversified growth drivers, strong execution and evolving partner ecosystem give it the edge.
While Upstart shows promise, PayPal anchors its fintech credentials on a mature, global payment infrastructure, an expanding product suite and a strong brand. Despite short-term challenges, PayPal's stability, scale, and strategic evolution make it a more balanced and reliable fintech pick for investors seeking resilient growth in their portfolios.
Even though both companies currently carry a Zacks Rank #3 (Hold) each, PYPL has a VGM Score of A, while UPST has a score of B, implying that PayPal is having a better hand at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.