FinTech experienced a significant decline amid escalating trade tensions, as investors weigh the impact of President Trump’s tariffs on consumer spending, the economy, and interest rates. Analyzing the sector stocks, we find SoFI Technologies (NASDAQ: SOFI) presenting a more compelling investment opportunity compared to Block Inc. (NYSE: XYZ), formerly known as Square. Currently, SOFI stock is valued higher at approximately 5x trailing revenues, compared to 1.3x for Block. However, our analysis suggests SOFI is poised to outperform XYZ in the coming years, driven by its stronger revenue growth trajectory and superior profitability metrics.
This assessment is grounded in a comprehensive evaluation of multiple key factors, including historical revenue performance, investment returns, and comparative valuation metrics. In the subsequent analysis, we will delve deeper into the reasons supporting our conviction that SoFI represents a more attractive investment prospect in the FinTech space over the next three-year horizon. But, if you are looking for an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
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How SoFI and Block Are Expanding Their Sales
SoFI demonstrated a 39% average annual revenue growth from 2021 to 2024, rising from $985 million to $2.6 billion. This fares marginally better than Block’s 37% average annual growth, which saw its revenue climb from $10 billion to $22 billion over the same timeframe.
Fueled by a consistent expansion of its member base, reaching a record 10.9 million in Q1 2025 (a 34% year-over-year increase), SoFi’s revenue growth is further propelled by the strong performance of its financial services, driven by products like SoFi Money, Relay, and Invest. This growth is supported by SoFi’s ongoing efforts to enhance user experience through platform improvements, expanded partnerships, and the introduction of valuable new features like Zelle and improved wire transfers.
Block’s revenue growth in recent years has been primarily fueled by the consistent expansion of both its Square ecosystem, offering payment processing and software solutions for sellers, and its Cash App platform, providing peer-to-peer payments and financial services to individuals. This growth has been further supported by strategic partnerships, such as Cash App’s integration with Lyft, which broadens user reach. Moreover, the introduction of new features and products across both platforms, including enhanced financial services and Bitcoin mining initiatives, aims to deepen user engagement and diversify revenue streams. The company’s ongoing focus on product development and AI-driven innovations positions it for solid potential future sales growth.
Net Margin Trends
Between 2021 and 2024, SoFI experienced a significant improvement in its net margin, from -49% to 19%. This can be attributed to a growing revenue base, and the increasing contribution of the higher-margin Financial Services and Technology Platform segments to the overall revenue mix, positively impacting net margin.
In contrast, Block Inc. saw its net margin rise from 2% to 13%. For Block, the margin expansion is driven by diversification from Bitcoin revenue. In 2024, net income included a significant remeasurement gain on Bitcoin investments, which positively impacted the net margin.
Financial Risk Analysis: A Balance of Debt and Cash in FinTech Stocks
When assessing financial risk, SoFI and Block present a relatively balanced picture. Although SoFI’s debt-to-equity ratio of 22% fares better than Block’s 27%, the latter’s cash-to-assets ratio of 35% is better than SoFI’s 12%. In essence, SoFI demonstrates a stronger debt profile, while Block maintains a more robust cash position.
SOFI and XYZ: Comparing 4-Year Stock Returns Against the S&P 500
Over the past four years (early January 2021 to present), while the S&P 500 has increased by approximately 50%, the performance of SOFI stock has been relatively flat, moving from $12 to around $13, albeit with significant annual volatility: +27% in 2021, -71% in 2022, +116% in 2023, and +55% in 2024. This contrasts with the S&P 500’s more consistent returns of +27% in 2021, -19% in 2022, +24% in 2023, and +23% in 2024, indicating SOFI underperformed the index in 2022. In stark contrast, XYZ stock has experienced a sharp 75% decline from $220 to around $50 during the same period, consistently underperforming the S&P 500 in each of the last four years with returns of -26% in 2021, -61% in 2022, +23% in 2023, and +10% in 2024.
SOFI Stock: The Superior FinTech Investment Choice?
We believe SoFi currently presents a more favorable investment than Block Inc. This is primarily due to SoFi’s robust revenue growth, increasing profitability, and comparable financial risk profile, driven by its diversified and effectively cross-selling financial services platform across lending, financial services, and technology segments. In contrast, while Block’s broader ecosystem encompassing Square and Cash App offers significant scale, it also introduces complexity that may contribute to comparatively slower growth in certain areas. This fundamental difference in performance is reflected in their valuations: SoFi trades at a price-to-sales ratio of 5 (slightly below its four-year average of 5.5), while Block’s P/S ratio is 1.3 (significantly below its four-year average of 3.7).
For investors aiming to reduce the inherent volatility associated with individual stocks like SOFI and XYZ, there are alternative investment strategies available. The Trefis RV strategy, which has a history of outperforming its all-cap stock benchmark, provides a diversified approach to potentially achieve solid returns. Likewise, the High Quality portfolio has shown superior performance compared to the S&P 500 with returns that exceed 91% since its initiation, offering potential upside with reduced stock-specific risk.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
