Here’s What You Should Buy Over PayPal Holdings, Inc. (NASDAQ:PYPL) According To Jim Cramer

Financial technology firms' SoFi Technologies, Inc. (NASDAQ: SOFI ) and PayPal Holdings, Inc. (NASDAQ: PYPL )'s shares have diverged in performance in 2026. SOFI is down by 31% year-to-date while PYPL is up by 5.9%. PayPal Holdings, Inc. (NASDAQ:PYPL)'s stock has gained primarily on the back of takeover news, but Cramer has remained unconvinced. In his previous remarks about the firm, the CNBC TV host remarked that he was hesitant to recommend the stock on the basis of takeover news. In his morning appearance on August 17th, Cramer admonished analysts for recommending the stocks even though they were struggling:

"One of the more irritating parts of this market is, the insistence of loving fintech. The analysts just love fintech. And the three that they love are SoFi, Klarna, and now PayPal. Look, I totally understand it. But you don't need to reiterate every day people. We understand. PayPal maybe a takeover candidate. Klarna is doing really great. SoFi, it's going to come back. Just stop. Analysts stop recommending these. Let them go to where they are on the downside. And then you can recommend them. . .I really think that's what happened is that, thatPayPal, when we heard that it might get a takeover bid, it made everything really exciting to people. But I just think, no, just go buy Wells Fargo. Go buy JPMorgan over Klarna. Okay. Or over PayPal."

SoFi Technologies, Inc. (NASDAQ:SOFI)'s narrative surrounds its valuation. The firm's forward P/E ratio is 31.55, which is nearly double that of banking giant JPMorgan and more than 2x of PYPL's 11.79. The risk to SoFi Technologies, Inc. (NASDAQ:SOFI)'s valuation comes from its transformation into a digital bank from a student loan company. Therefore, the firm's Financial Services and Technology platforms are at the center of the narrative.

On this front, SoFi Technologies, Inc. (NASDAQ:SOFI)'s second quarter saw its two businesses grow net revenue by 29% and drop by 23% annually. Technology suffered as a large client transitioned away from the platform. SoFi Technologies, Inc. (NASDAQ:SOFI)'s management added that the two businesses should account for more than 50% of overall revenue over the long term. To sum it up, the firm's headwinds could stem from high deposit costs of sizable amount of funds, such as $45 billion in the latest quarter, while the capital light Financial Services business and fee-driven Technology Services could lead the way to growth.

Shifting towards PayPal Holdings, Inc. (NASDAQ:PYPL), it's all about turnaround versus acquisitions. The turnaround camp, of which its management is also a part of, hinges on improved checkout performance, AI modernization, cost savings and Venmo growth. Through these, PayPal Holdings, Inc. (NASDAQ:PYPL) aims to save $400 million in costs in 2026 and streamline headcount in 2027. Therefore, the firm could experience tailwinds should it achieve the stated $1.5 billion in gross run rate savings and generate earnings power.

On the flip side, mobile wallets are threatening PayPal Holdings, Inc. (NASDAQ:PYPL)'s core business - a fact that Cramer has also noted before. Additionally, analyses have suggested that the firm's top line revenue growth also depends on low margin processing which leaves out margin advantages. PayPal Holdings, Inc. (NASDAQ:PYPL)'s attempts to shift to branded checkouts are sluggish and have demonstrated a merer 2% growth in TPV. Consequently, on the acquisition front, the potential of acquirers to unlock value from different businesses could entice shareholders.

What do the hedge funds think? In Q1, 76 out of the 1,022 covered by Insider Monkey had held a stake in PayPal Holdings, Inc. (NASDAQ:PYPL). This figure was 47 for SOFI. Additionally, the funds appear to be wary of SOFI, as 15% of the float was short as of July end while the figure was 5% for PayPal Holdings, Inc. (NASDAQ:PYPL).

While Insider Monkey acknowledges the risk and potential of PYPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than PYPL that has 100x upside potential, check out our report about the cheapest AI stock .