PayPal stock was one of the great success stories of the pandemic.
But as the global economy reopens, we’re seeing stocks that thrived under the pandemic start to fizzle away.
That’s not happening to PayPal Holdings Inc. (NASDAQ: PYPL).
The company that already accounts for 22% of online transactions in the United States was stable pre-pandemic, and its growth during the unprecedented times wasn’t just riding the e-commerce boom, but is a sign of what’s to come.
PayPal investors are certainly happy with its performance as a growth stock, but we think it will spike even more in the coming year.
The company’s existing status as an online payment solution got it to where it is, but the additions of its “buy now, pay later” option and ability to buy, trade, and hold cryptocurrencies will send it much higher.
Here’s why we’re so bullish, plus our PayPal stock price prediction…
“Buy Now, Pay Later” Makes PYPL Stock a Buy Now
Internet consumers are embracing BNPL as an alternative to credit cards for its convenience and split payment options with no interest. It’s essentially customers taking home their purchase, but paying for it over time. It’s especially popular among millennial shoppers who are slowly taking over the e-commerce market.
PayPal has a firm grip on the BNPL market with over 27 million more users than its closest competitor. That leg up is huge in a market that is still so young it’s described as in the midst of a “land grab” as providers aim to secure the highest number of retailers to their platforms.
As 5 million consumers make BNPL transactions through PayPal at more than 450,000 merchants since its launch, the company has already seen a more than 2x average order volume. Even better, only about 2% of its merchants currently use the option. There’s incredible growth potential here.
PayPal is a juggernaut with over 20 million active merchant accounts and billions of transactions conducted every year – it’s just scratching the surface of the market’s potential.
The worldwide BNPL sector is expected to reach $166 billion by 2023, that’s a 177% jump from 2019 ($60 billion). The option has rapidly gained prominence in retail and service sector checkouts that can account for $680 billion worth of transaction volume worldwide by 2025, according to studies by Insider Intelligence.
While it’s growing, it’s hard to imagine a company outpacing PayPal’s established infrastructure.
Why PayPal Stock Will Double Expectations
As the company becomes more multidimensional, it’s investing in infrastructure to help maintain its growth, and it’s growing like bamboo. The app currently has 393 million active users, 14.5 million of which joined in Q1 of 2021.
To put that into perspective, Square has about 36 million active users, and Zelle has about 27 million users. In fact, Venmo is PayPal’s closest competitor with 40 million active users, and PayPal already owns the peer-to-peer app.
With so many active users, it’s astonishing how happy PayPal customers are. Boasting a sentiment score of 97, not only are the company’s customers content, but they’re loyal. This attitude from its current users will continue to drive the app’s popularity.
Even the merchants using PayPal see benefits compared to its competitors. It’s reported that consumers are 54% more willing to buy when a business accepts PayPal, and the app brings 17% more repeat buyers. Not only do consumers trust it more, but merchants prefer it.
In a move BTIG predicts will generate more than $1 billion in incremental revenue as soon as this year, PayPal announced a feature allowing customers to buy, sell, and hold cryptocurrencies from its app.
But PayPal isn’t stopping there.
In order to maintain its high customer satisfaction, it acquired digital asset security firm Curv. The cloud-based service will allow users to store crypto assets securely and access crypto-wallets without any hardware device. PayPal users are now able to use cryptocurrencies to shop at the 20 million merchants on its own secure network.
The buyout is expected to be completed by the first half of 2021 and will only help boost current partnerships with Bitcoin payment processors BitPay, GoCoin, and Coinbase.
It also announced a deeper partnership with Google Cloud to help accelerate its digital transformation and cater to its user’s evolving needs. Vice President of Global Finance Services Derek White said, “E-commerce has spiked during the pandemic with people using less cash. We’re working with PayPal to leverage the power of the cloud to make shopping with e-commerce easier, faster, and more secure.”
After a massive 24% spike in total active accounts prompted by the pandemic, PayPal was able to add capacity to its infrastructure in hours instead of months thanks to the cloud. The online payments system is off to a bang in the new year, and it’s showing no signs of slowing down.
That’s why Money Morning Defense and Tech Specialist Michael Robinson predicts PayPal stock will hit $500 a share in two years. That’s a 92% surge from today’s price.
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Source: Money Morning