Despite an increasingly competitive environment in international payments, e-commerce and physical stores, one team of analysts views market pioneer PayPal Holdings Inc. (PYPL) as positioned to lead the segment, driving its shares to outperform the broader market as it expands its 1% stake in global payment volumes.

Analysts at Stifel upgraded shares of the Palo Alto, California-based tech giant to buy on Thursday, applauding the company's additions of new financial services for customers. Analyst Scott Devitt wrote a note to clients outlining the leading global online payment platform's evolution into "a robust financial services ecosystem with an expanding value proposition for both merchants and consumers." He indicated that PayPal is only in the early stages of its transformation away from a "button/online checkout company" as it doubles down on e-commerce and payments digitalization with an end-to-end service. 

Stifel pegs PayPal's total market opportunity at about $110 trillion, including international payments, payments in e-commerce and brick-and-mortar locations. Devitt estimates that the company currently controls less than 1% of the market with an estimated 2018 payment volume of $581 billion. 

New Consumer-Facing Products to Boost Online Payments Pioneer

PYPL, trading down about 1.2% on Friday morning at $80.55, reflects a 9.4% gain year-to-date (YTD) and a 58.2% increase over the most recent 12 months. The broader S&P 500 has returned 1.9% and 12.8% over the same respective periods. Devitt lifted his 12-month price target on SQ from $82 to $99, reflecting a 23% upside. 

Last week, PayPal announced a $1.7 billion acquisition of mobile payments processing provider iZettle. The move to take over the Swedish company has been viewed as a play on the overseas market and has spurred speculation of continued consolidation in the space as Square Inc. (SQ) raises $750 million in a debt offering seen as funding its global M&A ambitions. 

Some on the Street have viewed the success of Square's platform, such as its peer-to-peer (P2P) service Square Cash as threatening PayPal's growth and the prospects for its Venmo app. Stifel addresses these concerns over an "intensely competitive environment," writing that, "the sheer size of the market should allow for multiple beneficiaries over the long term." 

As merchant customers use PayPal's tools and services to more effectively compete in the digital commerce landscape, the company's new consumer-focused products should "effectively address the roughly two billion consumers globally that are currently underbanked," wrote Stifel. (See also: Thanks to Bitcoin, Square Cash Is Outpacing Venmo.)