PayPal Holdings (PYPL -1.50%), a leading digital payments company, has seen its share price pop more than 30% over the past year, compared the S&P 500's 4% gains, and has skyrocketed 200% over the past three years.
Investors have pushed up Paypal's share price as the company has benefited from the expanding e-commerce market, which is projected to grow from a $2.8 trillion market in 2018 to a $4.9 trillion market by 2021. PayPal's early move into the digital payment space means that it has continued to grow along with increasing e-commerce sales, and in the most recent quarter the company's total payment volume (TPV) -- the total dollar value of transactions on the company's platform -- grew 22% to $161 billion.
To better understand how PayPal will benefit from digital payments over the next five years, let's take a closer look at how the company is cashing in on its early moves in this space.
PayPal's strong growth and new opportunities
One reason PayPal is likely poised for more growth over the next few years comes from its opportunity to continue tapping into the growing e-commerce market. As more businesses have brought their marketplaces online, it's caused a massive boom in e-commerce sales and allowed companies that provide online payment transaction services to surge.
By being one of the leading online payment transaction companies facilitating online transactions, PayPal benefits. Along with TPV growth in the first quarter of this year, PayPal's sales and customer growth are also improving. Revenue popped 12% year over year in the first quarter, and the company now has 277 million customer accounts, up 17% year over year.
PayPal also benefits from a growing opportunity in the person-to-person (P2P) payments market. The company owns Venmo, a popular P2P payment app, and at the end of the first quarter Venmo had more than 40 million active accounts that completed $21 billion in TPV on the app.
The company doesn't break out how much revenue it makes from Venmo, but other metrics show just how well the P2P app is performing: The company's management recently said that Venmo has an annual revenue run rate of over $300 million and that the app is on track to bring in $100 billion in TPV this year.
The U.S. P2P market is expected to reach $244 billion by 2021, up from $188 billion this year. With Venmo's early lead in this space, the company should continue to benefit from the market in the coming years.
Continue to focus on PayPal's long-term prospects
While there's no way of really knowing where PayPal will be in five years, the company's current trajectory is a good indication that it'll be able to continue benefiting from the growing e-commerce market and expanding P2P space.
The company has proved that, in addition to its organic growth, it knows how to make acquisitions of smaller companies to boost growth as well. For example, last year the company purchased iZettle, a European payment processing company that gave PayPal a larger foothold in Europe.
So whether it's through organic growth, acquisitions, or tapping into new growth trends in e-commerce and P2P payments, PayPal is on the right path for more growth. The next five years should be good to PayPal -- and its investors -- as the company continues to lead in the digital payment space.