PayPal Holdings (PYPL -1.68%) is tapping into a massive opportunity as more transactions in global commerce shift to digital platforms, and the company's recent stock performance shows it. Shares are up more than 550% over the last five years, bringing PayPal's market cap to $311 billion as of this writing. 

Some investors might look at that run and conclude they've missed out, but PayPal continues to innovate and deliver spectacular results every year. Here's why PayPal can keep producing millionaire-making returns.

A smartphone with the PayPal app displayed.

Image source: PayPal.

Turning the digital wallet into a financial powerhouse

PayPal delivered great results last year across every metric. It experienced record growth in net new accounts and transaction volume, driving revenue and adjusted earnings per share up 21% and 31%, respectively. 

The company introduced several new features last year to increase user engagement with the PayPal and Venmo apps, including buy now, pay later, check cashing, cryptocurrency trading, and QR codes for contactless checkout in-store. 

QR codes could significantly expand PayPal's business as management reported seeing a 19% increase in total payment volume from consumers using the new checkout option. PayPal has already signed up 29 top brands to offer its contactless checkout technology in stores, including Nike and CVS Health. Across all of PayPal's in-store checkout solutions, including tap and pay, it generated $20 billion in payment volume in 2020.  

Despite all of the new features the company introduced last year, management says 2021 will see even more changes with its digital wallets. PayPal plans to introduce personal finance tools and investment alternatives in its apps. It just recently rolled out cryptocurrency trading through Venmo, which could be another significant engagement driver. Rival Square saw more than three million customers buy or sell Bitcoin in the Cash app last year. 

PayPal has already released a Venmo credit card and just recently started allowing businesses to set up a profile in the app, which has previously been used strictly as a peer-to-peer (P2P) payment service. Allowing businesses to open a Venmo account will open the door for even more ways for consumers to use the app, driving growth in transactions and, ultimately, revenue.

PayPal is a trusted platform for businesses with a merchant network 29 million strong, and Venmo is already a widely used P2P app that processed $47 billion in payments last year for an increase of 60%. If a wave of small business owners start opening accounts on Venmo to accept payments, that could stoke the fire of an already explosive growth vehicle for the company.

New products are driving transaction growth

Each of these new products, such as the Venmo credit card, cryptocurrency transactions, and other digital wallet features, are individually small opportunities for a business that processed $936 billion in payment volume last year. But all of these products combine to drive material returns for investors as CEO Dan Schulman explained on the fourth-quarter earnings call.

"All of the new functionality that we've put into place, whether that be crypto, buy now, pay later, the Venmo card, QR codes are adding to usage," Schulman said. "They're adding incremental [payment volume], they're adding incremental transactions."

PayPal expects further growth in payment volume in 2021. Management's guidance calls for revenue to reach $25.5 billion for an increase of 19% excluding currency changes. That should translate to growth in adjusted earnings of roughly 17%. Those are millionaire-making results, and PayPal has been consistently posting these kinds of numbers for years. 

It's uncertain where the stock will go in the near term as it trades at a high valuation of 59 times forward earnings guidance, but I wouldn't quibble too much over the high price tag. PayPal is pursuing a multitrillion-dollar addressable market. The company likely crossed $1 trillion in trailing 12-month payment volume in the first quarter, and it's still growing around 20% annually. It's not too late to put this growth stock in your nest egg.