STNE vs. PYPL: Why StoneCo Offers More Upside Than PayPal Currently

StoneCo STNE and PayPal PYPL are two fintech powerhouses specializing in digital payments. StoneCo operates in Latin America’s emerging markets, while PayPal operates globally. Both are expanding beyond core payments into value-added financial services, targeting merchants and consumers alike.

In recent times, StoneCo is capitalizing on localized execution and operational discipline in Brazil, while PayPal is undergoing a bold transformation, modernizing branded checkout, accelerating omnichannel adoption and scaling AI-driven innovation.

As investor attention sharpens, the question now is: which stock offers more upside? Let's find out.

STNE Outperforms PYPL, Industry and S&P 500 in a Month

Over the past 30 days, StoneCo shares have rallied 12.7%, significantly outpacing the broader sector’s 4.9% gain and the S&P 500’s 2.8% rise. During this period, PayPal shares have improved 3.1%.

Key Reasons Why StoneCo is a Compelling Fintech Investment Opportunity Now

Localized Innovation with Strategic Infrastructure Control: StoneCo is capitalizing on Brazil’s accelerating digital payments adoption by combining deep local expertise with relentless product innovation. From launching features like Pix Troco (QR-code cash withdrawal) to expanding its own acquiring infrastructure, the company is enhancing customer experience while gaining operational control. Its full-stack platform and regional focus position it to ride long-term structural tailwinds in financial inclusion and SME digitization.

Disciplined Capital Deployment and Robust Shareholder Returns: Having identified R$3 billion in excess capital at the close of 2024, StoneCo has already returned approximately R$1 billion year to date through aggressive share repurchases. In first-quarter 2025 alone, StoneCo repurchased R$843 million worth of shares, contributing to a total of R$2.4 billion in buybacks over the past 12 months, driving a 12% distribution yield. The company also launched a R$2 billion share repurchase program.

The Case of PayPal

Cultural Shift Fueling Execution and Ecosystem Growth: Under the new leadership of CEO Alex Chriss, PayPal is undergoing a strategic transformation marked by greater agility, transparency and product focus. This cultural reset is driving tangible results, particularly in core product innovation. PayPal’s branded checkout experience is being modernized at scale, now powering 45% of U.S. volume and more than half in Europe, leading to better conversion and reduced friction. At the same time, omnichannel TPV has more than doubled, and Venmo’s growth continues with “Pay with Venmo” up 50%, new accounts up 4%, and ARPU rising 12%.

Localized Expansion and 100% Coverage of Key Merchants: The new go-to-market model gives PayPal full engagement across its largest global merchants and platforms. Recent regional investments (new Middle East and Africa office) and vertically aligned teams enhance execution, especially in high-growth, underserved markets.

However, despite signs of progress, in the first quarter of 2025, PYPL management acknowledged ongoing headwinds in unbranded checkout and branded share losses, particularly on mobile, where competition from Apple Pay and Shopify remains fierce. The company is also facing margin pressures as it ramps up investment in product modernization and AI capabilities, which may take time to yield material financial upside.

Comparing Valuation

StoneCo is trading at a forward 12-month price-to-earnings (P/E) ratio of 9.80, below its five-year median of 20.76. PayPal’s forward earnings multiple sits at 13.46, below its five-year median of 20.62. Meanwhile, both companies appear undervalued when compared with the sector’s forward 12-month P/E of 25.96X. At present, STNE stays discounted compared to both PYPL and the sector.

STNE: A Strong Buy Now

Given its combination of innovation, disciplined capital allocation and favorable valuation, StoneCo, a Zacks Rank #1 (Strong Buy) stock, stands out as the stronger fintech compared to PayPal, a Zacks Rank #3 (Hold) stock right now.

StoneCo’s strategic execution in Brazil’s structurally expanding digital economy, paired with robust shareholder returns and operational efficiency, presents a more immediate scope for upside. While PayPal’s transformation is promising, it still faces near-term headwinds in market share and margins. With STNE outperforming in price momentum and trading at a greater discount to both peers and historical averages, investors have stronger reasons to be bullish on its long-term potential. You can see the complete list of today’s Zacks Rank #1 stocks here.

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

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