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PayPal's Future Keeps Getting Brighter

By Danny Vena - Updated Feb 12, 2021 at 3:25PM

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On the heels of a record year, the digital payment processor believes growth will accelerate.

PayPal (PYPL 2.70%) revealed last week that by a variety of metrics, 2020 was the best year in the company's history. In the fourth quarter, revenue grew 23% year over year, while non-generally accepted accounting principles (GAAP) earnings per share climbed 29%. Yet based on PayPal's forecast, that growth could accelerate over the coming year.

On this clip from Motley Fool Live, recorded on Feb. 4, "The Wrap" host Jason Hall and contributor Danny Vena discuss why the company will likely continue its winning streak in 2021.

Jason Hall: Well, all that is just that flywheel is just built in the balance sheet. Over $19 billion in cash, less than $9 billion in debt, access to low-cost debt with long maturity dates. Let's think about what to expect going forward. Maybe give us 30 seconds or so and just talk about what we can expect the next year or two, and then think long-term beyond that.

Danny Vena: Well, the company's forecast, essentially what they said was, in the coming quarter they expect revenue to grow about 28% year-over-year, which I thought was pretty remarkable considering that their revenue growth just recently was up 23%. They're saying that they expect that revenue growth to continue to accelerate.

They expect their GAAP earnings per share to grow tenfold from $0.07 to $0.70, and their adjusted earnings per share to grow about 50%. [LAUGHTER] It's pretty amazing though those numbers. Investors who are new to the market and seeing these numbers, are going to get spoiled a little bit and expect this from all their investments and that's just not going to happen.

Finally, it expects to add roughly 50 million new net active accounts. That will put the total up to about 427 million, an increase of about 13%.

Longer-term looking out, three years, five years, 10 years, PayPal was the original when it comes to digital payments. They were the first one out there.

Jason Hall: Digital wallet. Yeah.

Danny Vena: They keep expanding, not only their market share, they keep expanding the services that they add. They're expanding into new geographic markets. I don't see PayPal doing anything other than continuing to grow over the next decade.

It's not going to be obviously in a straight line and it's certainly not going to be as much growth as we saw over the last year. Much of that was driven by the pandemic, but that being the case, digital payments is the wave of the future and PayPal is right there at the center of it.

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