On 20th anniversary, PayPal (PYPL) caps era of growth, sets new goals

Highlights

• The company expects 750 million active accounts by 2025.
  
  
• PayPal estimates revenue of over US$50 billion by 2025.
  
  
• The PayPal stock returned over 256% gains since its split from eBay in July 2015.

PayPal Holdings, Inc. (NASDAQ:PYPL), which marks its 20th anniversary on Tuesday, has benefited from the increased digitalization. The demand for digital payment services, accelerated by the rapid growth of eCommerce, helped the company expand its footprint.

The company offers transactions in over 100 currencies and operates in over 200 markets.

Here we look at the company's historical performance and growth opportunities as it celebrates its 20th anniversary as a publicly-traded company on February 15.

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PayPal’s rise from US$1 bn to US$133 bn company

PayPal was valued at around US$1 billion after it went public on February 15, 2002. PayPal’s Nasdaq IPO was an instant success, with the stock climbing more than 50% to close the first-trading day at US$20 per share. The company, originally named Confinity, was founded by Peter Thiel, Max Levchin, and others in December 1998.

In October 2002, the e-Commerce company eBay acquired PayPal for US$1.5 billion.

In four years after it went public, PayPal surpassed its target of 100 million end-user accounts, and in the same year, it rolled out a new mobile payment platform, PayPal Mobile, that allowed customers to pay through PayPal with smartphones.

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In 2013, PayPal acquired its rival Braintree Systems (owner of Venmo) for US$800 million, and in early 2014, PayPal’s major shareholder Carl Icahn demanded the firm to part ways with eBay.

Following that, in July 2014, PayPal’s shareholders consented to Icahn’s demand, forcing a split between eBay and PayPal, which once again started trading as a single public company.

On the day it started trading as a single company in 2015, its market value skyrocketed to US$49 billion, creating an army of PayPal millionaires.

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In 2015, PayPal agreed to buy the digital money transfer company Xoom for US$890 million, which helped the firm accelerate its operations on international payments.

PayPal's growth since its spin-off in 2015 and the eBay effect on its business

PayPal's annual revenue rose from US$9.24 billion in 2015 to US$25.37 billion in 2021, while its number of active users grew from 179 million to 426 million. However, the former parent eBay’s gradual separation from its payment platform affected profit.

The company's revenue rose 13% YoY to US$6.9 billion in the fourth quarter of FY21, marking its smallest increase in the last two years. If there had been no eBay effect, the company said its revenue would have grown 22% in the final quarter. Its fiscal 2021 revenue rose 18% YoY to US$25.4 billion, while its total payment volume (TPV) grew by 33% YoY to US$1.25 trillion.

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What's next?

The company said it expects the active accounts on its platform to reach 750 million by 2025, and its revenue would more than double to US$50 billion. PayPal estimates a 22% compound annual growth rate (CAGR) for its earnings between 2020 and 2025. In addition, the company anticipates its annual free cash flow to double from US$5 billion to more than US$10 billion.

The company has increased spending on its marketing campaigns and added new products and features to attract more customers in line with its target.

Its new "super app", which combines all the features like mobile messages, digital wallet, peer-to-peer payments, buy-now-pay-later, etc., will likely pave its way for growth.

The company has recently partnered with Synchrony Financial to add a high-yield savings account named PayPal Savings to its portfolio.

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Bottomline 

The PYPL stock traded at US$115.98 at 11:30 am ET on February 14, up 0.60% from its previous close. The stock grew 256.35% since its split from eBay in July 2015. Its current market cap is around US$133.42 billion, up from US$49 billion in 2015. However, given its CAGR revenue growth rate of 18.5% between 2015 and 2020, the company’s current projection seemed achievable. The increasing demand for digital payment services will help in its growth.