eBay disclosed within its second quarter 2010 results that it is adding about 1 million new PayPal accounts every month and had 87 million active registered users at the end of Q2 2010 [1].

We believe PayPal's aggressive expansion in Asia, faster adoption of 'Bill Me Later' service, and increasing use of mobile phones apps are some of the factors driving PayPal's growth.  If eBay is able sustain this kind of growth in the long term as well, it could translate to a 10% upside to the  $30 Trefis price estimate for eBay's stock .

Upside potential for eBay's stock

We estimate that PayPal constitutes about 18% of the $30 Trefis price estimate for eBay's stock . We believe eBay will be able to increase PayPal's registered user base from 77 million in 2009 to 215 million by the end of Trefis forecast period, at an average growth rate of around 16%.

PayPal's user base grew at a rate of 21% from 2008 to 2009 and it has shown similar growth in the first six months of 2010.  If PayPal is able to sustain this kind of growth in the future, it could increase its registered user base to 292 million instead of the 215 million that we forecast by 2016.  This scenario could spell a 10% upside to the $30 Trefis price estimate for eBay's stock .

Below we discuss some of the driving factors behind PayPal's growth in detail.

1.  PayPal's aggressive expansion in Asia

In Q2 2010, PayPal tapped the Asian market aggressively:

    * PayPal partnered with China UnionPay to provide its service for people who shop online using UnionPay's credit card. UnionPay is the only domestic credit card organization in China.
    * PayPal's mobile platform was chosen by the Singapore government to power its M-commerce Infrastructure.
    * Malaysia PayPal signed a deal with Maxis, the country's largest telecom operator, to provide PayPal service to Maxis' 12 million subscribers.

2.  Faster adoption of Bill Me Later service

PayPal's Bill Me Later is a service that lets consumers make purchases online and make payments later.  The service has gained rapid adoption recently and can benefit from reduced credit availability for consumers through traditional sources like bank credit cards.

3.  Increased usage of PayPal mobile phone app

PayPal's mobile phone app has seen increased use.  PayPal's mobile payment volume in the first six months of 2010 was double the volume for all of 2009 [1].

What do you think?  Will PayPal be able to sustain such growth for much longer?