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Home Business & Finance

Better Growth Stock: Block vs. SoFi Technologies todayheadline

May 31, 2025
in Business & Finance
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One of these fintech names has a far more promising future than the other, which hitched its proverbial wagon to the wrong star.

Does your portfolio need a bit more exposure to the fintech space? There are plenty of great options out there, although payment technology platform Block (XYZ -0.45%) and online banking outfit SoFi Technologies (SOFI 1.02%) are a couple of investors’ favorites right now. Either would likely work well enough for you.

If you’ve only got room for one of these holdings at this time, however, choose SoFi. Here’s why.

Why SoFi Technologies

Don’t panic if you already happen to own a stake in Block. You’re hardly doomed. While shares are still trading down more than 70% from their pandemic-inspired 2022 peak, analysts remain largely bullish, collectively rating the stock as a strong buy while supporting a consensus price target of $66.86 that is roughly 7% above this ticker’s present price. Slow and steady long-term revenue and earnings growth are in the cards, even if that progress can run a little hot and cold.

SoFi Technologies is still the better bet, though.

On the off-chance you’re reading this and aren’t familiar with it, SoFi is an online bank offering all the services you’d expect from a more traditional brick-and-mortar banking company. Checking and savings accounts, loans, credit cards, investing services, and even insurance and travel planning are in its wheelhouse. Where SoFi Technologies differs is that it’s only an online bank — there are no physical branches to visit.

Image source: Getty Images.

That might initially seem a bit nutty to investors who remember a time when online banking didn’t exist at all, simply because the internet itself had not yet been invented. When brick-and-mortar banks added online self-service as an option, it was a game-changing add-on.

Now, this digital self-service choice isn’t just the norm — it’s the preferred means of handling most banking matters. A 2024 survey commissioned by the American Bankers Association and performed by Morning Consult found that 22% of bank customers in the United States now use their personal computers as their first choice for taking care of their banking business, while a whopping 55% of this crowd prefers a mobile app for handling banking matters. In-branch visits and phone calls, conversely, are only the first choice for 8% and 4% (respectively) of U.S. banks’ customers. It also comes as no surprise that older consumers are less likely to use a mobile app or PC to do their banking, while digitally native younger customers are increasingly likely to do so.

Connect the dots. Where SoFi Technologies already sits is where the world is going.

That’s what its results indicate, anyway. Its customer headcount has grown every quarter since the beginning of 2020, from just over 1 million members then to nearly 11 million members as of the end of this year’s first quarter. It’s expecting more of the same pace of growth this year as well, driving revenue and earnings higher in step with this ongoing expansion, thanks to a greater and more cost-effective scale. SoFi’s full-year guidance is for top-line growth of around 25% and a near-doubling of per-share profits.

Don’t look for this growth to end then, however. An outlook from Precedence Research suggests the global online banking business is set to grow at an average annual pace of 40% through 2034. Although Europe is the biggest and apt to be the fastest-growing market, the North American market, where SoFi operates, isn’t far behind by either measure.

Just brace for the fact that you may not see big gains right away if you’re going to dive in at this time. Shares are already priced near analysts’ consensus one-year target of $13.70, and this crowd’s collective rating on this ticker is a lukewarm hold. SoFi Technologies should only be viewed here as a long-term prospect.

Why not Block

Still, SoFi is arguably a stronger growth investment than Block is at this time for a couple of key reasons.

But first things first.

You may be more familiar with this outfit than you realize. This is the company formerly known as Square, which, of course, offers card payment acceptance technology to small businesses and sole proprietors that weren’t being served by more conventional payment solutions providers. It still manages this business, too, but in 2021, it dove headfirst into the then-red-hot cryptocurrency arena by building a whole new technology around Bitcoin. Later that same year, Square changed its name to Block to better represent the new prioritization of its blockchain-based business.

It hasn’t been a terrible decision; obviously, these markets are still around and are still producing at least some growth.

However, the payment-acceptance space is now both mature and crowded by entrenched powerhouses like PayPal, while technology companies like Alphabet‘s Google and even IBM are creeping deeper into these same spaces. The barriers to entry into these markets are now quite low, taking a toll on Block’s pace of forward progress.

To this end, the company is only expected to produce sales growth of about 4% this year, dragging per-share earnings lower with that slowdown. Revenue growth should slightly accelerate next year — but only slightly — to a modest pace of about 10%. Analysts don’t expect it to ever get much better than that again, either, even though profit margins are likely to continue widening at a measurably faster pace. That’s the first reason investors might want to opt for something more promising from the fintech space.

As for the second reason to steer clear of Block, while the blockchain hype was once palpable, it’s not unfair to say it hasn’t exactly lived up to expectations.

That’s not to say it won’t. If and when it happens, Block is ready to serve its targeted sliver of the business. That’s mostly by offering a secure digital Bitcoin wallet.

As it stands right now, though, neither consumers nor corporations seem as interested in cryptocurrencies or their underlying blockchain technology as much as previously hoped. Their security (or lack thereof) remains a reasonable concern, while blockchain itself is proving to be a complicated and costly solution to problems that don’t actually exist. In the meantime, although Bitcoin currently accounts for 40% of Block’s revenue, it still only makes up about 3% of the company’s gross profits.

Perhaps Block hitched its wagon to the wrong star.

Never say never, of course. Things could change. There’s also an obvious opportunity ahead for Block’s well-established Cash App and payment-processing businesses, even if the business is crowded, as the world continues to wean itself from cash and even conventional credit cards in favor of more payments being made directly to and from bank accounts. As it turns out, these direct transfers are often more secure and typically cheaper than card-based payments.

It’s a shift, however, that still works to SoFi’s advantage far more than it does to Block’s.

Tags: blockGrowthSoFiStockTechnologiestodayheadline
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