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Fintech Titans: PayPal vs. Block

  • peachgardenpartner
  • Mar 23
  • 5 min read

By Milo Goldstein



Executive Summary


PayPal and Block are two leaders in the digital payment industry but operate with distinct

strategies. PayPal operates on a global scale with strong profitability by dominating e-

commerce payments, while Block is a disruptor in the fintech field through leveraging its

integrated ecosystem and cryptocurrency innovation, enabling Block to capture a significant

share of the small business and peer-to-peer markets.


  • PayPal has an operating margin of 18% and free cash flows of $2.19 billion, showing

    stability. Its forward P/E ratio of 13.93 and PEG ratio of 0.9 also suggest it is undervalued relative to the industry.


  • Despite having a -3.7% operating margin, Block presents desirable growth-adjusted value (PEG ratio of 0.58) driven by Cash App and early cryptocurrency adoption.



Company Snapshots


PayPal:


  • Name: PayPal Holdings, Inc.

  • Ticker: PYPL

  • Industry: Digital Payments

  • Market Cap: $68.92B, (as of 21.03.2025)

  • Share Price Performance (YTD): -18.37%

  • Share Price Performance (1Y): 7.10%


Block:


  • Name: Block, Inc. (formerly Square)

  • Ticker: XYZ

  • Industry: Digital Payments and Financial Services

  • Market Cap: $37.788B, (as of 21.03.2025)

  • Share Price Performance (YTD): -28.23%

  • Share Price Performance (1Y): -25.12%



Business Model Comparison


PayPal:


  • Core Business: Online payment processing for consumers and vendors.

  • Revenue Streams: Transaction fees, PayPal credit, partnerships.

  • Key Products: PayPal, Venmo, Braintree, Xoom.

  • Strengths: Global scale, strong brand recognition and network effects.


Block Inc:


  • Core Business: In-person and online payment processing, focusing on small businesses.

  • Revenue Streams: Transaction fees, subscription and services-based revenue (Cash App, Block Loans), hardware revenue, and bitcoin revenue.

  • Key Products: Block POS, Cash App, Afterpay.

  • Strengths: An integrated ecosystem, strong growth within Cash App, and cryptocurrency adoption.



Comparison


  • PayPal is more widely recognised within e-commerce, whereas Block dominates in-person payments and small business tools.


  • Block’s adoption of cryptocurrency and financial services provide it with a unique edge; however, PayPal has a wide global reach and strong partnerships (e.g. eBay, Amazon).



Financial Performance

Key Metrics (Q4, 2024) 

Metric 

PayPal 

Block

Revenue ($000’s) 

8,366,000 

6,032,561

Non-GAAP Net Income  ($000’s)

1,209,000 

535,192

Operating Margin (%) 

18 

-3.7

Free Cash Flow ($000’s) 

2,191,000 

338,350


  • PayPal’s revenue is significantly higher, showing its larger scale.


  • PayPal’s higher net income demonstrates its higher profitability due to margin scalability, whilst Block’s is lower due to its higher CapEx, fuelled by investment into growth areas such as Cash App and cryptocurrencies. This is reflected in block's operating margin.


  • PayPal’s $2.19B free cash flow depicts its cash generative abilities crucial for R&D reinvestment or shareholder returns.


  • Block’s $338 million free cash flow is far lower, demonstrating high capital

    expenditure and a more growth-focused strategy.



Total Addressable Market (TAM) Analysis


PayPal:


  • TAM: The digital payments market size was valued at $10+ trillion in 2022.

  • Captured TAM: PayPal processed $1.68 trillion in total payment volume in 2024.


Block:


  • TAM: The small business payments, peer-to-peer payments, and cryptocurrency market

    is valued at $5+ trillion.

  • Captured TAM: Block processed $61.95 billion in total payment volume in 2024.


Comparison:

  • PayPal has a larger captured TAM due to its global presence.

  • Block has a smaller captured TAM, but is rapidly growing, particularly due to

    cryptocurrency growth.

  • Both companies have large growth potential, PayPal with its global expansion, and Block with its integrated ecosystem and cryptocurrency adoption.



Competitive Advantage (Moat)


PayPal:


  • Moat Sources: Large network effect due to PayPal being so established, creating

    brand loyalty and important partnerships with major e-commerce platforms such as

    Shopify and Fiserv.

  • Durability: High durability due to its established position in online payments.


Block:


  • Moat Sources: Integrated ecosystem (hardware, software, financial services), Cash

    App’s strong growth, and an early mover advantage within crypto.

  • Durability: Only moderate durability as competition within fintech is very high.


Comparison:


  • PayPal’s moat is more durable to PayPal operating on a larger scale; however Block’s integrated ecosystem provides it with a unique competitive edge.



Valuation Metrics

Metric 

PayPal 

Block 

Industry Average

Forward P/E Ratio 

13.93 

13.87 

25-35

EV/EBITDA 

10.08 

15.98 

15

PEG Ratio 

0.9 

0.58 

-


  • PayPal and Block are both undervalued relative to the industry. 


  • Block’s higher EV/EBITDA reflects on its growth investments, while PayPal’s  multiple reflects on its strong cash flows and profitability. 


  • Block’s lower PEG ratio signals better growth-adjusted value. 



Elevator Pitch


PayPal:


PayPal is a global leader in digital payments, is a well-established brand with strong network

effects, as well as great partnerships with major platforms like eBay and Amazon, making it a

staple for e-commerce. PayPal has a scalable business model with an 18% operating margin

and robust free cash flows of $2.19 billion, allowing for reinvestment and shareholder

returns. Despite intense competition such as Apple Pay, PayPal’s forward P/E ratio of 13.93

and PEG ratio of 0.9 make it an undervalued investment in the rapidly growing $10+ trillion-

dollar digital payments market.


Block:


Block is transforming the financial services industry through its integrated ecosystem,

including Square for small businesses, and Cash App for peer-to-peer payments. With Cash

App having over 57 million users, a strong focus on cryptocurrency, and Afterpay, Block is

fast-growing in the fintech field. Despite a -3.7% operating margin due to large investments,

Block’s forward P/E ratio of 13.87 and PEG ratio of 0.58 showcases its desirable growth-

adjusted value. Block’s $5+ trillion TAM and unique innovation make it a favourable long-

term investment, although intense competition and high bitcoin volatility remain risks.



Risks and Challenges


PayPal:


  • Competition: Apple Pay, Google Pay, traditional banks.

  • Regulatory Risks: Data privacy and antitrust concerns.


Block:


  • Competition: PayPal, Stipe, other fintech firms.

  • Volatility: High exposure to volatile cryptocurrency markets.



Recommendation


  1. PayPal: Strong buy – For investors seeking stability and global exposure in the digital

    payments market.

  2. Block: Buy – For growth-oriented investors willing to be exposed to higher risk investments.



Sources


Yahoo Finance (2024) 'PayPal Holdings, Inc. (PYPL)'. Available  

at: https://finance.yahoo.com/quote/PYPL/ (Accessed: 21.03.2025). 


Yahoo Finance (2024) 'XYZ Stock Price'. Available  

at: https://finance.yahoo.com/quote/XYZ/ (Accessed: 21.03.2025). 


Business Model Analyst (2024) 'PayPal Business Model'. Available  


Lumos Business (2024) 'Square (Block) Business Model Analytics'. Available  at: https://lumosbusiness.com/square-block-business-model-analytics/ (Accessed:  21.02.2025). 


SEC (2024) 'PayPal Holdings, Inc. Q4 2024 Earnings Release'. Available  at: https://www.sec.gov/Archives/edgar/data/1633917/000163391725000017/pypl4q 24earningsrelease.htm (Accessed: 21.03.2025). 


SEC (2024) 'Square, Inc. Annual Report for the Fiscal Year Ended December 31, 2024'.  Available  at: https://www.sec.gov/ix doc=/Archives/edgar/data/0001512673/000162828025007376/sq 20241231.htm (Accessed: 21.03.2025). 


MarketsandMarkets (2024) 'Digital Payment Market Size, Share, and Forecast'. Available  at: https://www.marketsandmarkets.com/Market-Reports/digital-payment-market 209834053.html(Accessed: 21.03.2025). 


Chargeflow (2024) 'PayPal Statistics and Facts'. Available  


Global Market Insights (2024) 'Peer-to-Peer (P2P) Payment Market Analysis'. Available  at: https://www.gminsights.com/industry-analysis/p2p-payment-market (Accessed:  21.03.2025). 


CNBC (2025) 'Block (XYZ) Q4 2024 Earnings Report'. Available  


Finerva (2024) 'Fintech 2024 Valuation Multiples Report'. Available  at: https://finerva.com/report/fintech-2024-valuation-multiples/ (Accessed: 21.02.2025).

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