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PayPal Holdings Inc. has been a big winner during the pandemic as more people experiment with digital payments, and the company sees its strong momentum continuing for years.
The company expects that it could have 750 million active accounts by 2025, Chief Executive Dan Schulman said at PayPal’s PYPL, +0.65% virtual investor-day presentation Thursday, which would be nearly double the 377 million that PayPal had as of the fourth quarter.
PayPal also is targeting $50 billion in revenue in 2025, according to Chief Financial Officer John Rainey, up from $21.5 billion in 2020. That would bring the company’s compound annual growth rate up to 20% over the next five years, compared with 18% over the past five years.
The company expects that its total payment volume could hit $2.8 trillion in 2025, roughly triple its 2020 total.
While shares were up as much as 6.7% earlier in Thursday’s session, they finished the day up 0.7%, which Wedbush analyst Moshe Katri suspected was related to a “conservative” financial forecast.
PayPal forecasted a 20% compound annual growth rate for revenue and a 22% CAGR for earnings per share, but Katri said that Wall Street was looking for a low-20% level revenue target and a mid-20% EPS target.
“Having said that, management did in fact guide for accelerating organic revenue growth (diminishing eBay impact, user engagement expansion) from 16% to 20%,” he told MarketWatch.
Barclays analyst Ramsey El-Assal wrote that “there are very few ~$330 billion market-cap companies growing revenues and/or EPS at or above 20% annually.”
PayPal executives spent the investor-day presentation outlining the expanded role that the company could play in financial services by turning the company’s app into a hub for various financial tools.
Schulman said during the presentation that he expects to see a “new financial system emerge” that PayPal can help shape through a focus on moving money more quickly, expanding access to financial services, and bringing together “formerly disparate capabilities.” Opportunities for PayPal include investment capabilities, bill-payment tools and high-yield savings accounts, he said.
The company also envisions its app as a shopping hub, where people can build wish lists, earn rewards, monitor prices and connect with merchants through personalized offers.
PayPal aims to be a “super-app,” a term used to describe platforms like AliPay in China that bring in varied money-related capabilities. Schulman said that many people have dozens of apps on their phones but that it can be time consuming to make sure they’re up to date with all of a person’s payment instruments.
“That’s really the promise of a super-app, where you can live a lot of your digital life on one app and then be able to manage all of your transactions in one place, track them all, and have personalized, customized recommendations,” he told MarketWatch. Using machine learning, PayPal could also tailor recommendations to a consumer’s budget, he explained.
The company sees big potential internationally as well, with Schulman calling out the company’s acquisition of GoPay in China and its partnership with MercadoLibre Inc. MELI, +1.94% in South America. “We think that we have a large opportunity to scale our business well beyond the core markets that we serve today,” he said on the investor presentation.
PayPal recently rolled out features for cryptocurrency trading, in-store payment options and installment payments, which have been driving further momentum for its service. “We are seeing historical engagement curves start to bend and accelerate,” Schulman said.
The engagement trends help reduce PayPal’s churn rates and increase its average revenue per user, Schulman said. He expects the average revenue per user to “grow substantially over the next five years.”
PayPal shares have gained 56% over the past three months as the S&P 500 SPX, +0.17% has risen 10%.
