Affirm vs. PayPal: Which FinTech Stock is a Better Buy?

: AFRM | Affirm Holdings Inc. Cl A News, Ratings, and Charts

AFRM – The fintech industry is experienced impressive growth, which should continue in 2022. With that in mind, today I’ll analyze and compare two fintech companies, PayPal Holdings (PYPL) and Affirm Holdings (AFRM), to see which stock is currently the better investment.

The fintech industry has witnessed massive growth in recent years amid increasing digitalization processes caused by the COVID-19 pandemic. According to Market Data Forecast, the global fintech industry is estimated to reach $324 billion, growing at a CAGR of 23.4% over the next five years.

However, year-to-date (YTD), the fintech industry underperformed the whole market due to the increasing industry regulations as well as other industry-specific challenges, as evidenced by the 9.23% decrease in the Global X FinTech Thematic ETF (FINX).

In this article, I intend to analyze and compare two fintech stocks: PayPal Holdings, Inc. (PYPL) and Affirm Holdings, Inc. (AFRM). Affirm operates as a financial technology company that offers a state-of-the-art “buy now, pay later” lending platform for e-commerce transactions. PayPal is one the largest debit electronic payment systems that allows customers to pay bills and purchases, send and receive money transfers. YTD, shares of PYPL are down 18%, while AFRM stock has increased 0.5% over the same period.

Recent Developments

On December 16th, The Consumer Financial Protection Bureau issued several orders to five “Buy Now, Pay Later” (BNPL) companies to gather more data regarding the risks and benefits of BNPL credit. Both PYPL and AFRM came to this list amid regulators’ concerns about accumulating debt, regulatory arbitrage, and data harvesting on the BNPL market. CFPB Director Rohit Chopra said, “Buy now pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too.” As a result, BNPL companies turned red, with AFRM falling over 9% after the announcement. 

Recent Quarterly Performance & Analysts’ Estimates

In terms of Affirm’s financials, the company’s total revenue for its fiscal first quarter of 2022 grew 54.8% year-over-year to $269.39 million. Also, AFRM topped the Wall Street revenue estimates by $20.03 million. AFRM’s GAAP EPS stood at ($1.13), missing consensus by $0.74. 

The company’s gross merchandise volume has been reported 84% higher year-over-year at $2.7 billion. Transactions per active user were improved by 8% to 2.3 as of September 30th, 2021.

The company’s EPS is expected to grow 49.57% year-over-year to ($0.20) in its fiscal second quarter of 2021. Analysts expect Affirm’s revenue to increase 63.40% year-over-year to $333.40 million in the current quarter.

PayPal’s top line for its fiscal third quarter of 2021 has risen 13.2% year-over-year to $6.18 billion, but the company missed Wall Street revenue estimates by $50 million. PYPL also posted a total payment volume (“TPV”) of $310 billion, up 26% compared to the year-ago quarter. Additionally, PayPal Holdings reported a Non-GAAP Q3 EPS of $1.11, topping analysts’ consensus by $0.03.

For the fourth quarter, analysts project PYPL’s EPS to be $1.13, representing a moderate 4.6% increase compared to the year-ago EPS of $1.08. Besides, analysts expect that PYPL’s revenues for the current quarter should lift by 12.50% to $6.88 billion. 

Comparing Valuations

In terms of Forward EV/Sales, AFRM is currently trading at 23.50x, which is 172.6% higher than PYPL, whose multiple is currently standing at 8.62x. When it comes to the TTM P/B multiple, AFRM’s P/B multiple of 11.81x is slightly higher than PYPL’s 10.19x. 

However, their EV/sales and P/B multiple are significantly higher than the industry’s median of 4.16x and 4.57x, respectively. Therefore, AFRM’s relatively high growth rates could somewhat justify its premium valuations, while PYPL’s moderate growth rates and overvalued conditions could create additional pressure on its stock. 

The Bottom Line 

I believe that AFRM is a better investment than PYPL at these levels. AFRM’s relatively small size should allow it to better capitalize on the industry’s growth, making it a worthy high-growth stock. Moreover, AFRM’s recent quarterly report and forward growth rates look better. Finally, AFRM’s premium valuation could make sense, adjusting it to the company’s growth rates. 

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


AFRM shares were trading at $97.68 per share on Thursday morning, down $3.39 (-3.35%). Year-to-date, AFRM has gained 0.45%, versus a 27.53% rise in the benchmark S&P 500 index during the same period.


About the Author: Oleksandr Pylypenko


Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
AFRMGet RatingGet RatingGet Rating
PYPLGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Does Trump Change Stock Market Outlook?

The rally of the S&P 500 (SPY) after the election gives a sense that investors are happy that Trump was elected. But perhaps there is more to this story than meets the eye. That’s why Steve Reitmeister shares his updated market outlook taking into account the pros and cons of Trumps proposed new policies. This comes with a preview of his top 11 stocks to buy now.

3 Streaming Stocks Benefiting from Cord-Cutting Trends

As streaming continues to dominate the digital entertainment landscape, the global streaming market presents a lucrative investment opportunity. So, it could be ideal to invest in fundamentally solid streaming stocks Netflix (NFLX), Walt Disney (DIS), and Roku (ROKU). Read further...

3 Gold Stocks to Buy as Safe-Haven Demand Grows

Gold is a stable investment now due to its role as a safe-haven asset during economic uncertainty, rising demand, industrial use, and growth, bolstered by central bank purchases and interest rate cuts. Therefore, investors should consider investing in top gold stocks such as Newmont (NEM), Barrick Gold (GOLD), and Agnico Eagle Mines (AEM). Read more...

3 AI Stocks Transforming Industries and Driving Future Growth

With rapid digitalization, rapid adoption, and development, as well as surging demand, the AI market is on the rise. Amid this backdrop, investors could buy fundamentally solid AI stocks NVIDIA Corporation (NVDA), Microsoft (MSFT), and Meta Platforms (META) poised for substantial gains. Continue reading...

Updated Stock Market Expectations

The S&P 500 (SPY) has already reached an impressive goal of hitting 6,000. Yet you can see how much shares are struggling now up against this resistance. Steve Reitmeister shares his views on what comes next for the market and his top 10 stocks to stay on the right side of the action.

Read More Stories

More Affirm Holdings Inc. Cl A (AFRM) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All AFRM News