SoFi vs. Sezzle: Which Fintech Stock Is the Better Buy?
- SOFI
- SEZL
- NVDA
SoFi (NASDAQ: SOFI) and Sezzle (NASDAQ: SEZL) are two of the better-known emerging fintech players. SoFi has been around longer, but Sezzle’s explosive returns during the past five years have put it on the map.
SoFi aims to offer traditional banking services at a discount due to its online model, while Sezzle is a buy now, pay later (BNPL) platform that is looking to diversify. Here’s what investors should know if they only want to invest in these stocks.
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Sezzle is growing faster
Most growth investors like to start by looking at year-over-year trends for revenue and net income. If these numbers increase at an accelerated rate, it can pave the way for higher stock returns.
Although both companies are growing nicely, Sezzle is the clear winner. Its Q2 results revealed 52% year-over-year revenue growth, compared to SoFi’s 43% growth rate.
It isn’t just a one-quarter fluke, either. Sezzle has a five-year revenue compound annual growth rate (CAGR) of 50%, while SoFi has a 39% CAGR during that stretch. The numbers are similar when looking at the past three years as well.
Growth seems to be picking up for Sezzle; it reached 854,000 active subscribers in the second quarter, a 76% year-over-year increase. SoFi is also gaining subscribers at a nice rate, but its 35% year-over-year member growth rate isn’t as impressive.
SoFi is more diversified
SoFi offers a wide range of financial services. You can open a bank account, take out a loan, get credit cards, invest in stocks, and access other financial resources. Sezzle has been diversifying, but almost all of its revenue still comes from its BNPL model.
Sezzle makes money from merchant fees and subscription plans that give members more perks. The subscription plans let Sezzle offer more flexibility to navigate consumer markets, but any meaningful slowdown in the BNPL industry will hurt Sezzle. The company doesn’t have backup businesses like SoFi, which managed to perform well and diversify nicely when student loan payments were paused by the federal government during the pandemic.
Being a one-trick pony isn’t necessarily a bad thing. Meta Platforms has become one of the world’s most valuable publicly traded companies almost exclusively because of ads on its social media sites. Meta is trying to diversify, but ads are still the defining category.
