Shares in Payment Firm Adyen Surge

On its much-anticipated investor day, the Dutch company lowered its outlook, but shares rose 35%. What's going on?

Robert van den Oever 9 November, 2023 | 2:23PM
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Dutch payment firm Adyen (ADYEN), one of the most high-profile tech stocks on the continent, yesterday convened an investor day hastily at the request of shareholders due to their increasing concerns. This was accompanied by a trading update for the third quarter, which is also unusual for the company. It stated that Adyen's net sales increased by 22% year on year to €413 million in the third quarter. At constant exchange rates, sales would have grown an additional 4% to a total of 26%, the company said. The transaction volume of processed payments increased by 21% year on year.

Adyen also set new targets of net sales growth in the "low 20s to high 20s" on average annually up to and including 2026 and an EBITDA margin above 50% by 2026.

These figures are significantly lower than Adyen's previous outlook that stated an expected revenue growth between the "mid 20s and low 30s" and an EBITA margin of above 65%.

Adyen's shares took a while to open on Euronext Amsterdam on Thursday because pre-opening trade exceeded a 10% movement (up or down), which causes a trading freeze by the rules of Euronext. The shares then soared by more than 30%. 

Despite the share price reaction, Morningstar analyst Niklas Kammer says the overall trends are in line with what the company has shown in the first half of 2023. The digital segment volume rose 21% year-on-year in the third quarter, with the United States showing a stable trend compared to the first half of the year. Kammer say it is important that Adyen achieved growth in the US that is above market average.

The Big Reset

The new expectations offer a more clearly specified timeframe than the previously used “medium term” and are significantly lower than before, the analyst said. However, the guidance that Adyen provides in the update is in line with Kammer's existing calculations and assumptions, so he sees no reason to change his €1,660 per share Fair Value (the shares are currently trading at €926). The analyst sees the lowered expectations and the clearer timeline as a response to some of the communication shortcomings of Adyen's management.

The strong price gain on Thursday shows that investors seem to be reassured by the new clarity provided by Adyen.

Investors had become used to the sky-high growth figures that Adyen achieved in recent years, especially in the pandemic era. In the US it was 52% in the first half of 2022, so when a figure of 23% emerged for the first half of 2023, it was a major setback that investors struggled to adjust to. When Adyen published its first half results for 2023 in August, investors were shocked by the much lower growth compared to their expectations. Until this point, the US was the largest growth market for Adyen, after it had already conquered Europe in the first years of its existence.

Adyen is not the only company in the payment processing market that is having a hard time. Competition is increasing, margins are under pressure and the battle for market share is in full swing. This was also felt by the French Worldline (WLN), which had to issue a profit warning at the end of October due to problems in Germany.



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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Adyen NV1,186.80 EUR2.72Rating

About Author

Robert van den Oever  is Research Editor of Morningstar Benelux

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