Action Alerts PLUS holding PayPal Holdings Inc. (PYPL - Get Report) is leading the digital payments industry with "unwavering" online dominance, Morgan Stanley analyst James Faucette wrote to investors.

But despite a clear lead over the rest of the pack, Wall Street has become too fixated on PayPal's online acceptance lead, Faucette said, according to Bloomberg. But the company's domination is strong - PayPal is accepted at 79% of the top 500 U.S. internet retailers. Amazon Pay, from Inc. (AMZN - Get Report) , is in second place, with just 12% acceptance.

PayPal is on track for "steady to accelerating growth" that will help it keep growing either at or above the rate of overall e-commerce, the analyst said, with possible catalysts including more frequent share buybacks, revised medium-term guidance and more deals in 2018. PayPal CEO Dan Schulman told TheStreet in January that he considers PayPal to be a "consolidator" in the industry and would be open to continued mergers and acquisitions this year.

Some PayPal investors became concerned earlier this year when eBay Inc. (EBAY - Get Report) announced that it will gradually replace PayPal as the main payment option on its website over the coming years. While the news rattled PayPal's share price, Chief Financial Officer John Rainey reiterated to TheStreet that this had been the plan all along and wouldn't hurt the company as much as many feared.

Morgan Stanley added that bitcoin doesn't appear to be a material threat to online payments businesses at firms including PayPal, Visa Inc. (V - Get Report) and Mastercard Inc. (MA - Get Report) . Some digital assets such as dash or litecoin are better suited for online payments disruption than bitcoin is.

PayPal stock has rallied 75% in the last year. Shares pushed higher 2.2% to $75.46 on Monday.