Pagaya Shines in 2025: How Should Investors Play the Fintech Stock?

In 2025, Pagaya Technologies Ltd. PGY hit an inflection point with improving fundamentals and profitability. Despite macroeconomic headwinds and regulatory risks, the company posted three consecutive quarters of positive GAAP net income, a dramatic turnaround from substantial losses in the previous years.

In the nine months ended Sept. 30, 2025, PGY’s net income was $47.1 million against a net loss of $163.5 million in the prior-year period. The company’s robust results were driven by strong network volume growth, improved monetization, better operating leverage and solid credit discipline, supported by an improvement in capital structure. PGY was able to move into profitability as it avoided overexposure to credit risk and controlled expenses efficiently.

Moreover, driven by both portfolio seasoning and structural changes in funding and underwriting, PGY’s credit-related losses and impairments improved drastically from the 2024 reported levels. In the nine months ended Sept. 30, 2025, credit-related impairment losses on investments in loans and securities declined by more than $95 million on a year-over-year basis. Lower impairments reflect better-performing loan vintages, more stable delinquency and charge-off trends, and improved accuracy of Pagaya’s artificial intelligence (AI)-driven underwriting models.

As credit-related losses decline, it means that PGY’s earnings volatility has reduced, improving the company’s profitability, which is evident from its 2025 results.

Thus, driven by the impressive financial performance, PGY’s shares skyrocketed 125% in 2025, significantly outperforming the industry and the S&P 500 Index’s 11.7% decline and 18.7% growth, respectively. The company also fared better than its two close peers, LendingTree TREE and LendingClub LC. LendingTree’s shares jumped 37%, while the LendingClub stock gained 17% last year.

2025 Price Performance

Given Pagaya’s robust performance, investors must be tempted to buy the stock. But, before making any investment decision, it is better to have a detailed understanding of PGY’s fundamental strength and growth prospects.

Pagaya’s Positives to Note:

Diversified Business Model: PGY’s core strength lies in its resilient and adaptable business model. The company has continuously been expanding beyond its original focus on personal loans, moving into auto lending and point-of-sale financing. This diversification reduces exposure to cyclical risks in any single loan category, making the business more stable across economic cycles.

Parallel to this, Pagaya has built a robust network of more than 135 institutional funding partners to support the sale of its asset-backed securities (ABS). The company leverages forward flow agreements — structured financing arrangements in which institutional investors commit to purchasing future loan originations from Pagaya’s banking partners. These agreements offer a critical alternative funding source if ABS markets face disruptions during market stress.

PGY has a competitive edge in its proprietary data and product suite. One standout offering is its pre-screen solution, which enables banks and lenders to present pre-approved loan offers to existing customers without requiring a formal application.

By analyzing the lender’s customer base and identifying qualified borrowers proactively, the company helps financial institutions deepen customer relationships and expand credit access with minimal incremental marketing spend. This marks an evolution in its value proposition from driving market share gains for partners to enhancing their share of wallet with existing customers.

Lean Balance Sheet: Pagaya operates a capital-efficient model that largely avoids holding loans on its balance sheet, significantly reducing its exposure to credit risk and market volatility. This is made possible through the company’s robust network of institutional funding partners and a focus on issuing ABS.

The capital raised in advance is held in trust and deployed only when a lending partner originates a loan through Pagaya’s AI-driven network. At that point, the loan is immediately acquired by a pre-committed funding source, either through an ABS vehicle or a forward flow agreement. As a result, most loans never reside on Pagaya’s balance sheet or only do so briefly before being transferred.

This off-balance-sheet model has proven particularly effective during periods of elevated interest rates and market stress, such as from 2021 through 2023. By minimizing credit exposure and avoiding significant loan write-downs, Pagaya has maintained its financial flexibility in turbulent environments.

PGY appears to rely heavily on forward flow agreements. These contracts provide a reliable and predictable source of capital, helping the company maintain liquidity even amid tightening credit markets and rising inflation.

Comparing PGY’s Business Model With TREE & LC

Unlike PGY, LendingTree is a marketplace platform, not a lender. It matches consumers with financial product providers like mortgages, personal loans, credit cards and insurance.

LendingTree does not underwrite, originate or hold loans. Hence, its balance sheet is not credit-heavy. TREE’s balance sheet is detached from revenue generation. The company is primarily structured to support a fee-based digital marketplace, not balance sheet lending.

Unlike PGY, LendingClub uses a hybrid model. It originates consumer loans and keeps a portion on its own balance sheet while selling the rest to investors. This gives LendingClub more direct exposure to interest-rate and credit cycles but also greater control over pricing and loan mix.

Analyzing Pagaya’s Valuation

In terms of valuation, the PGY stock looks inexpensive compared with the industry at large. The stock is trading at a forward 12-month price/sales (P/S) ratio of 1.28X, below the industry average of 3.36X over the last three years.

Price-to-Sales F12M

How to Approach the Pagaya Stock Now?

Given its strong performance last year, resilient business model and capital-efficient funding strategy, PGY stands out in the fintech space. Its AI-driven platform, diversified revenue streams and reliance on forward flow agreements shield it from market volatility and credit risks.

However, the company has been witnessing a persistent increase in expenses over the past few years. Over the last three years (2021-2024), total costs and operating expenses saw a compound annual growth rate of 26.2%. The uptrend continued in the first nine months of 2025, mainly because of elevated production costs.

Nevertheless, analysts seem optimistic regarding PGY’s earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for Pagaya’s 2025 and 2026 earnings has been revised upward to $3.10 and $3.41 per share, respectively. The estimated numbers indicate year-over-year growth rates of 273.5% and 10% for 2025 and 2026, respectively.

PGY’s Earnings Estimate Revision Trend

Thus, with accelerating earnings estimates, along with bullish analyst sentiments, PGY is well-positioned for continued growth. Moreover, the stock trades at a discount relative to the industry at large, making its valuation attractive. For investors seeking exposure to a high-growth, tech-enabled lender with solid fundamentals, the PGY stock is a compelling buy.

At present, Pagaya sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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