2 Stocks Down 14% and 21% to Buy and Hold

Key Points

• Block's hard-to-predict crypto business doesn't take away from its strong core ecosystems.

• PayPal is looking at huge opportunities in payment processing and advertising.

• 10 stocks we like better than Block ›

The fintech industry is projected to grow rapidly in the coming years, partly due to the relentless shift to online commerce and expanding demand for digital payment methods. It's a great idea to invest in companies that can ride that wave, including Block (NYSE: XYZ) and PayPal (NASDAQ: PYPL). These two fintech leaders are among the most popular in the field, and although they have faced some challenges this year, causing them to lag behind broader equity markets, both stocks could be excellent long-term options.

1. Block

Block has not performed well this year due to weaker-than-expected financial results. In the second quarter, the company's revenue dropped almost 2% year over year to $6.05 billion. However, Block's gross profit still jumped 14% to $2.54 billion, while its adjusted earnings per share rose 32% to $0.62.

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Gross profit at Block's two core businesses, Square and Cash App, both increased at a good clip. Square first started as a provider of sleek and convenient point-of-sale systems and now offers a range of services to small and medium-sized businesses, helping them run their operations more efficiently. Cash App, a peer-to-peer payment app, has also extended its reach and now competes with banks in many categories. It offers stock and cryptocurrency trading, a debit card, direct deposits, and more.

Both of these parts of Block's business should provide important long-term growth avenues. For instance, Cash App is especially popular among younger people, including teens (who require parental approval to have an account). Block sees a major opportunity as its younger customers mature and start earning and spending more money. Block's focus on younger consumers could pay rich dividends down the road.

The company will also continue to offer more services. The buy-now-pay-later (BNPL) options introduced by Cash App during the past few years have become increasingly popular and were one of the drivers of the app's strong gross profit growth in the second quarter. Even without increasing the number of users, Cash App is increasing engagement -- that is, existing customers opting for more services -- which is helping drive strong results for that side of the business.

Some may be concerned about Block's reliance on Bitcoin trading. The company's lower revenue from this segment in Q2 was a key reason for its decline in top-line growth. Crypto trading can be volatile, so while it will sometimes help Block's revenue soar, it will, occasionally, have the opposite effect. Even so, Block's core business outside of that is performing well and presents attractive long-term prospects. That's why, after declining 14% this year, the stock is a buy.

2. PayPal

PayPal also disappointed investors with its Q2 results, particularly with its free cash flow, which decreased significantly during the period. Even so, the fintech leader's free cash flow outlook for 2025 remained intact, so this is hardly something to worry about. Meanwhile, PayPal remains one of the largest ecosystems among fintech companies. It ended the second quarter with 438 million active accounts and boasted a total payment volume of $443.5 billion during the period, representing a 6% year-over-year increase.

PayPal is one of the most trusted entities in its niche, among both consumers and businesses. The numerous transactions it facilitates give it access to a wealth of data, including trends and user preferences. That's why the company recently decided to launch an advertising business, enabling merchants to target potential customers with greater precision using shopping data.

This is still a new opportunity for PayPal, but it has the potential to become highly profitable in the future. The company's core business, though, remains underpenetrated. PayPal estimates a combined $325 billion opportunity in payments, both online and offline, as well as an $800 billion opportunity in advertising.

The company's total addressable market dwarfs its trailing 12-month revenue of $32.3 billion. Although it won't capture this entire market, it doesn't need to. It's well-positioned to grab even a slice of it thanks to its existing position, brand name, and network effects. PayPal remains a worthwhile investment, despite its 21% stock price decline this year.

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Prosper Junior Bakiny has positions in PayPal. The Motley Fool has positions in and recommends Bitcoin, Block, and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.