PayPal (NASDAQ:PYPL) has been the elite name in online and contactless payments for well over a decade now. And PayPal stock, despite competition that’s intensified over the years, is still the best of its kind today.
PayPal has one of the most interesting corporate histories in the 21st century. It began in the late 1990s as two separate companies: Confinity and X.com. The companies merged in early 2000 and the newly renamed PayPal went public in 2002.
At the time, PayPal had revenue of $61 million. Eighteen years later that figure has jumped to $18.3 billion. The company’s early leadership is the thing of legend: Peter Thiel, who went on to be an early investor in Facebook (NASDAQ:FB) and Airbnb, ran the company. Current Tesla (NASDAQ:TSLA) CEO Elon Musk founded X.com, and a number of other great entrepreneurs moved through the ranks.
An acquisition at the hands of eBay (NASDAQ:EBAY) in 2002, the same year it went public, for $1.5 billion, took shares off the market for more than a decade. When eBay spun off its go-to online payments service in 2015, it did so at a valuation of roughly $43 billion.
Five years later, PayPal stock has essentially quadrupled. And, the company continues growing rapidly despite a pandemic and unprecedented global economic shutdowns. With that in mind, it still looks like a compelling growth stock to buy.
Savvy Acquisitions Make PayPal Stock an Industry Leader
Aside from great leadership, consistent execution and a great brand, PayPal’s growth over time has been largely driven by a pattern of savvy acquisitions. In 2013, it acquired fintech platform Braintree, the owner of mobile money transfer app Venmo, for $800 million.
In 2015, PayPal acquired Xoom, another payments platform, for $890 million. The move accelerated its exposure to international markets, with a presence in 37 different countries. Importantly, it gave PayPal access to many of the large emerging markets like Brazil, India, China and Mexico. For shareholders, this purchase brought a significant level of geographic diversification.
Its most recent major acquisition was a $4 billion purchase of the e-commerce coupon extension Honey. This buy is definitely helping drive price action in 2020. In the first quarter, the company added 20.2 million net new active users, and 10.2 million were one-time user gains from the Honey acquisition.
Even net of the Honey acquisition, the 10 million net new active users was a first-quarter record.
And moving forward, as new users sign up for Honey, they’ll also get a free PayPal account. That helps make this service more ubiquitous, and the company’s network effect increasingly formidable.
The Bottom Line on Best-in-Breed PayPal
Importantly, PayPal stock is holding up even as the pandemic ravages the global economy. Contactless payments enablers like PayPal should enjoy a secular long-term benefit from what’s going on right now, and in the first quarter, total active accounts grew 17% year-over-year to 325 million.
The company’s most recent earnings report noted high growth in January and February, a deceleration in March and then an incredibly rapid acceleration in April. That reflects well on the company going forward. It added 7.4 million net new accounts in April alone, an increase of 135% year-over-year.
The payments landscape is one of the largest addressable markets in the world. And, there’s still plenty of room for the company to take share from the likes of traditional credit card companies like Visa (NYSE:V) and MasterCard (NYSE:MA), and even fintech players like Square (NYSE:SQ).
On top of that, PayPal is yet to be accepted by Amazon (NASDAQ:AMZN), leaving it a massive opportunity still on the table should the two companies ever work something out.
PayPal’s long-term leadership in online and mobile payments gives it enormous staying power. That’s why PayPal stock enjoys an overall B rating and an A rating on the quantitative side. As far as large-cap growth stocks go, this dot-com champion remains a great stock to buy in 2020.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
