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Digital payment and fintech companies Paypal Holdings Inc (NASDAQ: PYPL) and Square Inc (NYSE: SQ) are having a solid 2020, but Chantico Global CEO Gina Sanchez is sounding an alarm. Decline In Spending: PayPal and Square's stock surge in 2020 has resulted in the two stocks becoming “extremely overvalued,” Sanchez said on CNBC's “Trading Nation.”Square's stock is trading at 167 times forward earnings, while PayPal's stock is trading at 46 times.The stocks have expanded from momentum and multiple expansion, but this may overlook the broader decline in spending that is “hitting all of these companies square in the gut,” she said. Some make the argument that fintech and digital-focused companies like PayPal and Square deserve a premium valuation compared to traditional credit cards, Sanchez said.But there is a major flaw in this thesis, she said: both groups are driven by consumption.”You need transactions in order to support all of these plays, and so I would argue that psychologically you can tell yourself that [justification] but I don't know that it's going to play out over a period in your portfolio.”Counter Argument: Joule Financial President Quint Tatro offered the other side of the argument and said PayPal and Square's stocks aren't as overvalued as they may seem to be.PayPal, for example, continues to show very rapid growth, along with strong free cash flow generation of $3.9 billion in 2019 that is modeled to grow to $5.95 billion in 2020, Tatro said. “And when you do something, again, as traditional as a discounted cash flow from an intrinsic value standpoint, the company's not that overvalued,” he said.Photo courtesy of Square. See more from Benzinga * Options Trades For This Crazy Market: Get Benzinga Options to Follow High-Conviction Trade Ideas * BofA Steps To Sidelines On Sonoco, Looks For Results In 2022 * Bob Iger Joins Board Of Animal-Free Dairy Maker Company(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

If Square only offered tools for the small business angle it started out with, it would be a growing company. Cash App users increased to 30 million in June and active transacting users grew to 7 million. Square considers Cash App a separate and whole ecosystem with various features such as cash card, bitcoin trading, and direct deposit, in addition to its foundation of peer-to-peer trading.