By Paul R. La Monica

Fintech stocks have had a brutal year so far. President Donald Trump's "Liberation Day" could make it worse.

Shares of Venmo owner PayPal, online personal loan companies SoFi and Upstart and "buy now, pay later" lender Affirm are all down more than 20% this year. Square/CashApp parent company Block has been hit even harder, tumbling more than 30%.

The concern? Renewed worries about inflation due to tariffs and growing fears of an increasingly sluggish U.S. economy (some say recession while others call it a mere "growth scare") could reduce demand for consumer loans. Trump doubled down on tariffs Wednesday, announcing reciprocal tariffs on U.S. trade partners around the globe.

"The outlook for consumer spending appears worse, with inflation expectations creeping up, rate cuts seemingly on pause, and the potential for negative wealth effects for the high end consumer to pressure discretionary spending such as travel, restaurants, and luxury, " said analysts at Goldman Sachs in a report Wednesday.

Wall Street is nervous that fintech stocks could slide further. Goldman cut its price target on PayPal Wednesday, to $74 from $82, noting growing competition and regulatory concerns for the company and a "cloudier" macroeconomic picture for fintechs overall.

And Bill Ryan of Seaport Research Partners, reduced his 2025 earnings per share estimate for SoFi on Wednesday, also highlighting the economic uncertainty.

"It is prudent to account for some additional capital markets volatility which could impact loan pricing," he said.

With all this in mind, some think that Visa and Mastercard, the old guard of payments processing and fintech if you will, remain the companies in the best position to benefit from consumers increasingly favoring digital payments over cash and credit cards.

" Visa and Mastercard remain top ideas, particularly in an uncertain macro environment, given broad based exposure to discretionary and non-discretionary spend, geographic reach and proven ability to stabilize expense growth in economic downturns," said fintech analysts at Oppenheimer in a report Wednesday.

Still, the strength of Visa and Mastercard haven't gone unnoticed by investors. Shares of Mastercard are up 4% so far this year while Visa's stock has gained nearly 10% in 2025. Neither stock is cheap either, with Visa trading at more than 30 times earnings estimates for this year while Mastercard has a forward price-to-earnings ratio of nearly 35.

That makes them certainly a heck of a lot cheaper than most other pure-play fintechs. SoFi is valued at nearly 50 times 2025 earnings estimates, while Affirm isn't expected to post a profit this fiscal year.

But investors might want to pay more attention to PayPal. The stock now trades for just 13 times this year's earnings estimates, well below its 5-year average multiple of 30.

Analysts at Mizuho think concerns about PayPal losing market share to Apple are overdone, mainly because Apple Pay is "far less dominant in PYPL strongholds like Germany, France and Italy."

Mizuho is also bullish on the prospects for Fastlane, PayPal's new guest checkout service. The hope is that Fastlane -- in addition to the legacy branded PayPal checkout option -- will lead to increased market share in payments.

"As the Fastlane opportunity materializes, this should help PYPL trade at an improved premium vs. the payments group," the Mizuho analysts said.

With that in mind, Mizuho says PayPal deserves to trade at about 17 times 2026 earning estimates, a modestly higher valuation than its competitors. That would imply a price target of $96, nearly 45% higher than its current stock price.

Don't rule out a rebound for Block stock, either. Its shares also trade for just 13 times earnings estimates for 2025. The Oppenheimer fintech analysts argue that even though a boost to gross profits in the latter half of this year "could be at risk in an economic downturn," the "recent pullback" in Block's stock "implies much of this to be baked into shares."

Write to Paul R. La Monica at paul.lamonica@barrons.com

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April 03, 2025 03:00 ET (07:00 GMT)

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