With the world still in the throes of the coronavirus pandemic, digital payment apps like PayPal (NASDAQ:PYPL) continue to remain a key trend this year. As physical stores shuttered across the globe in March 2020, people increasingly turned to digital apps as a means to pay for goods and services. This resulted in some impressive gains for PayPal stock, with its shares up 116% in 2020.
As we look ahead, there are several catalysts that hint at greater upside for the company in the coming years. Here’s a look at what these trends are how they will help PayPal stock deliver some spectacular returns in the future.
Expansion Plans Will Boost PayPal Stock
PayPal started 2020 on a modest note but changes in the digital payments ecosystem as a result of the pandemic pushed the stock to new highs. When looking at PayPal’s growth potential, it’s also worth considering its ongoing efforts in achieving this.
The company acquired Honey for $4 billion at the start of 2020. This online tool helps customers save money when they check out. Adding to this is the payment app’s push to get into the in-store payments market. PayPal introduced its contactless QR technology that allows customers to pay with the QR code on the app.
PayPal’s winning card (apart from its core business), is its payment platform Venmo. The app acts as a digital wallet and lets users transfer or receive cash from friends and family. As of September, Venmo has a user base of $52 million and a revenue target of $900 million by 2021. During the government stimulus rollout, Venmo introduced its Cash a Check feature, which allows users to cash paper checks on the app.
Looking towards more recent growth catalysts, PayPal became the first company to gain full control of GoPay, a digital payments app in China. Prior to this the company controlled 70% of its operations. According to PayPal’s CEO, Dan Schulman, this will help them “be a stronger partner to Chinese financial institutions.”
A second catalyst is PayPal’s buy now pay later (BNPL) service that will help the company disrupt the e-commerce market. With the BNPL market expected to hit $166 billion by 2023, this will serve as a major tailwind for PayPal stock.
Major Crypto Gains Ahead
In recent years, crypto has become more of a mainstream currency with its increasing adoption among retailers, merchants and governments. This is great news for PayPal that has several features integrated with the digital currency.
For one, merchants that accept PayPal as a means of payment will now accept crypto as well. This gives customers a greater incentive to initiate transactions with this currency. Adding to this, PayPal states it will convert the cryptocurrency to fiat which can then be used to pay for transactions. This takes away the element of volatility associated with cryptocurrency.
PayPal’s big push into crypto is a big positive for two reasons. One, PayPal has the opportunity to earn more fees earned from crypto transactions as more consumers start to use it. Second, the payment platform will also gain from the increase in the value of cryptocurrency. Earlier this month crypto volume on the app hit a record $242 million.
With that said, crypto is still in its nascent stages as far as digital payment apps. But once this currency goes mainstream, PayPal is well poised to dominate this space.
The Bottom Line
I’m bullish on PayPal stock given its strong growth potential in 2021 and beyond. The company’s entry into the Chinese fintech market will result in some meaningful relationships with companies in the region that could translate to greater gains. This growth will be bolstered by PayPal’s integration with cryptocurrency. As a high-growth digital currency, this partnership with PayPal will incentivize more customers to hop on the crypto bandwagon.
Finally, it’s also worth considering the increasingly important role of digital payments since the start of the pandemic. With contactless payments becoming a major (in some cases only) means of payment in 2020, there is a good chance this trend will continue post-pandemic as well.
So, adding to its solid tailwinds and internal plans for expansion, I think the positive investing sentiment towards digital payments is reason enough to place your bets on PayPal stock.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.