PayPal Holdings (PYPL 0.59%) is off to a great start in 2021. The digital payments provider processed $285 billion worth of transactions in the first quarter alone. It was the company's strongest quarter in history, as revenue surged 29% year over year, while profits nearly doubled. 

The stock is up 7% year to date after more than doubling in 2020, but more results like this will eventually get the share price moving higher. PayPal got a huge boost last year from more people using contactless checkout options. Let's look at three excerpts from the first-quarter earnings calls that shows the momentum carrying forward in 2021.

A man using the PayPal app on a smartphone.

Image source: PayPal.

New services are driving higher engagement

PayPal reported that customers used their account an average of 42 times over the last 12 months, which is almost once per week. PayPal introduced several new products last year, including QR codes for contactless checkout and the ability to buy or sell cryptocurrency, which could drive the number of transactions it processes even higher over time. 

PayPal's new Buy Now, Pay Later service allows customers to pay in four interest-free installments. Half of customers who have used it have made repeat purchases within three months, while 70% have repeated in six months. 

During the earnings call, CEO Dan Schulman said, "Our daily active users were up 33% in Q1 across the base, but our new products and services right now are driving huge engagement levels." 

New customers are the most engaged

In 2020, PayPal added 73 million net new active accounts across its platform, which also includes the peer-to-peer payment app Venmo. Active accounts grew 21% year over year in the first quarter, and management expects to finish 2021 with over 440 million users. 

Keep in mind, PayPal expects a slowdown in growth during the second quarter, as it laps the pandemic surge a year ago, but then growth is expected to reaccelerate in the second half of 2021. 

Most importantly, the newer customers signing up should make PayPal's business even more lucrative down the road, as they are using PayPal more often than customers who have been around a while. On that note, CFO John Rainey said, "these have been our most engaged cohorts that we've ever seen. And we're continuing to see those trends." 

Management raised guidance for 2021

While PayPal's growth was impressive in the quarter, it was partly boosted by soft year-ago numbers at the very start of the pandemic in March 2020. This made for an easier year-over-year growth comparison, but going back to pre-pandemic growth levels, it's apparent that PayPal still knocked it out of the park.

"[O]ur business is growing at structurally faster rates than pre-pandemic," Rainey said. In the first quarter, total payment volume grew at a two-year compounded rate of 33%. 

PayPal raised its full-year guidance and now expects revenue to reach approximately $25.75 billion for an increase of 20% on a currency-neutral basis. Adjusted earnings per share should grow slightly faster at a rate of 21%.

This guidance looks very strong, since it is on top of a record year in 2020 and also includes the loss of eBay's business, as it transitions to its own internal payments system. 

Considering the engagement trends and forward guidance, PayPal is a growth stock to keep an eye on in the near term.