Please ensure Javascript is enabled for purposes of website accessibility

PayPal Is Adding Customers Hand Over Fist

By Daniel Vena - Feb 13, 2021 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's accelerating user base is driving robust growth.

To say 2020 was a year like no other might sound like a cliche, but in this case, it isn't hyperbole. The ongoing shift to digital payments accelerated on a large scale and PayPal Holdings (PYPL -2.24%) was there to answer the call. As a result of this trend, the company reported a record number of new customers using its digital payment services.

On this clip from Motley Fool Live, recorded on Feb. 4, "The Wrap" host Jason Hall and contributor Danny Vena discuss PayPal's soaring customer metrics and how the growing operating leverage feeds the company's future success.

Jason Hall: Well, and their operating leverage, it's enormous how every user, every customer that's added, incrementally creates more value than the one who was added before them. To me this underpins why I think PayPal is still such an incredible business. Talk, Danny, a little bit about some of those customer metrics.

Danny Vena: The customer metrics were, again, as strong, if not stronger than ever.

In the fourth quarter, the company added 16 million net new active accounts. Now, an active account is one that does some transaction on PayPal's network over the course of the trailing-12-month period. Those net new active accounts are up 72% year over year. That brings the total to 377 million, up 24%.

Now to put that in perspective, the entire population of the United States is less than 330 million. The number of customers on PayPal is essentially larger than the entire population of the United States.

Those customers are using PayPal as a payment method more often. They had roughly 41 payments per active account over the trailing-12-month period. That was up just 1%.

What's skewing that number a little bit is the fact that PayPal acquired Honey last year, which essentially helps online customers find discounts on websites that they frequent. If you adjust for Honey, it was actually closer to 43 payments instead of 41 over the trailing-12-month period, up about 5%. Again, it seems like every category that you look at, the financial metrics, the operating metrics, the customer metrics, they're all moving in the right direction. Which is why PayPal stock was bid up about 7% today.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$75.94 (-2.24%) $-1.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.