Block vs. Upstart: Which Fintech Stock Has More Upside in 2025?

Core Insights - The fintech sector is rapidly evolving, with Block, Inc. and Upstart Holdings emerging as key players due to their innovative business models and growth strategies [1][2] Group 1: Block, Inc. Overview - Block is expanding its fintech platform through Square and Cash App, providing comprehensive solutions across payments, commerce, and banking [3] - Innovations such as the Square Point of Sale app and "Cash App Afterpay" highlight Block's focus on user-centric design and revenue diversification [3] - The company is enhancing its omnichannel seller tools and has FDIC-approved lending capabilities, targeting younger users and families [4] Group 2: Challenges Facing Block - Block is experiencing macroeconomic challenges, including tariffs and reduced discretionary spending, which are impacting Cash App Card activity [5] - Despite a forecasted improvement in gross profit, near-term performance is affected by competition from PayPal, Shopify, and new fintech entrants [5][6] Group 3: Upstart Holdings Overview - Upstart is differentiating itself in the lending space by utilizing AI-driven credit modeling instead of traditional FICO scores, automating 92% of loans [7] - The company has expanded its loan portfolio to include auto loans, HELOCs, and small-dollar loans, achieving double-digit growth in Q1 2025 [8] - Upstart's AI engine is evolving, with Model 19 improving borrower behavior predictions and conversion rates increasing from 14% to 19% [9] Group 4: Financial Performance of Upstart - Upstart reported a 67% year-over-year revenue increase and achieved profitability with a non-GAAP EPS of $0.30 in Q1 2025 [9] - The company is increasingly relying on super-prime borrowers, which enhances funding consistency and reduces risk [9] Group 5: Comparative Estimates and Valuation - The Zacks Consensus Estimate for Block indicates a 3.55% sales growth and a 25.22% decline in EPS for 2025, with downward revisions noted [12] - In contrast, Upstart's 2025 sales are expected to grow by 58.8%, with EPS estimates trending upward [12][14] - Year-to-date, Upstart shares have decreased by 11.4%, while Block shares have declined by 24.9% [16] Group 6: Conclusion - Block's established ecosystem faces challenges from soft consumer demand and competition, while Upstart demonstrates stronger operational leverage and growth potential [19] - Upstart is positioned as the fintech stock with greater upside potential for long-term investors seeking innovation-led growth [19][20]