It's a matchup between two innovative and high-growth financial technology (fintech) giants. In one corner, SoFi Technologies (SOFI +0.34%) has emerged as a prominent U.S. financial services player enjoying strong demand for its online-based suite of solutions. On the other side, Nu Holdings (NU 0.82%) shares similarities through its digital-native platform, but with a strategic focus on Latin America.
Both companies have been big winners for investors in recent years and are already kicking off 2025 with a solid return year to date. Let's discuss whether SoFi or Nu Holdings is the better stock to buy now.
Image source: Getty Images.
The case for SoFi Technologies
SoFi stands out with its comprehensive approach to personal finance, leveraging its expertise in lending products -- such as student loans, personal loans, and mortgages -- into a one-stop financial hub. The company has been successfully expanding into more-traditional banking services alongside a broader range of financial products, including credit cards and investing options.
The recent trends have been impressive. Based on the latest data, from the third quarter (ended Sept. 30), it now counts 9.4 million members, up 35% over the past year. Members who may have initially signed up for a loan are increasingly adopting new financial services, powering a growth flywheel.
NASDAQ: SOFI
Key Data Points
That dynamic was a major theme in 2024, with third-quarter earnings per share (EPS) reaching $0.05, reversing the loss of $0.29 in the prior-year quarter. The company has benefited from the resilient economy in the United States as well as relatively stable consumer credit conditions.
SoFi is projecting 2024 revenue growth of approximately 22.5% compared to 2023, an increase from its previous guidance of around 18%. Moreover, the company has upped its 2024 EPS target to between $0.11 and $0.12, marking a significant turnaround from the negative $0.36 result last year.
Investors confident in the company's ability to execute a long-term growth strategy and capture market share from legacy banks have a great reason to buy the stock now.
The case for Nu Holdings
For all the points that make SoFi a potentially attractive investment, Nu Holdings' stock is perhaps even more compelling. It is larger, serving 110 million customers across Brazil, Colombia, and Mexico, with the majority using the platform as their primary bank. Secular tailwinds in the region such as an expanding middle class and a surge in smartphone penetration have fueled exceptional growth.
In the fintech's third quarter, revenue increased by 56% year over year on a foreign-exchange (FX) neutral basis. This is a reflection of the growing client base and higher average revenue per active client as customers add more products and services within the ecosystem. Profitability has also been excellent, with adjusted FX-neutral net income in the third quarter reaching $592 million, up from $356 million last year.
NYSE: NU
Key Data Points
At face value, Nu is a stronger growth stock than SoFi, but a full comparison is more nuanced. The bank's profile as a foreign company introduces a certain level of risk, including unpredictable macroeconomic conditions. This could be one reason the stock trades at 19 times its consensus full-year EPS as a forward price-to-earnings (P/E) ratio, a relative bargain next to SoFi stock, with its earnings multiple of 73.
But other metrics paint a mixed picture. Nu has a price-to-book (P/B) value of 7.3, well above SoFi at 3.2, with that premium possibly based on its dominant position in Latin America.
Ultimately, investors who want exposure to fintech trends in emerging markets may find Nu Holdings the better stock to own.
NU PE ratio (forward); data by YCharts.
Decision time: The edge to SoFi
It's a tough task to choose between SoFi and Nu Holdings; both are great companies well positioned to reward shareholders over the long run.
If forced to pick just one, I would give the edge to SoFi Technologies as the better stock in 2025. I believe the fintech may outperform amid recent interest rate cuts by the Federal Reserve and optimism for a new consumer credit growth cycle in the U.S. Strong results over the next few quarters could be the catalyst for its share price to climb higher.
