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17. aug. 2023 8:45 AM EDT
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Payments Provider Adyen Risks Losing its Stock-Market Halo
Stephen Wilmot hedcut
By
Stephen Wilmot
, Editor and Columnist, Heard on the Street
Another set of results from Adyen, another stock-market drubbing. The Dutch payments provider, once a darling of the European tech scene, needs Silicon Valley to get its mojo back.
The stock was down by more than a quarter in European trading Thursday after the company put out half-year numbers that showed a significant slowdown in sales and a 10% drop year over year in earnings before interest, taxes, depreciation and amortization.
Adyen, which manages payments for the likes of eBay and Uber, said some clients were optimizing costs rather than focusing on growth, particularly in the U.S. That is giving an opening to cheaper competitors, which it said provide “savings over functionality.” It attributed the trend to higher inflation and interest rates.
But rather than following the lead of its customers, Adyen is plowing on with its long-term growth ambitions. The company is known for providing a relatively bug-free payment service that can bridge between online and offline commerce. Steady investments and a focus on organic growth over acquisitions under co-founder and long-time boss Pieter van der Does have probably helped.
However, the combination of weaker sales and higher costs led to an Ebitda margin of 43% in the first half of 2023, down from 59% in the same period of last year and worse than analysts expected. The market response was a more dramatic rerun of what happened when Adyen delivered its last financial report six months ago. Back then, the stock fell 16% after the company hired more staff than expected.
The correction could be an opportunity for contrarian investors who, like Adyen, like to move forward when others are stepping back. The company said its current investment phase would end next year, which could pave the way for a strong rebound in margins when the company’s clients get back into growth mode.
If the recovery drags out or competitors make meaningful headway, though, the stock could have a long way to fall. It still trades at about 40 times expected earnings, the lowest since its initial public offering but well above fintech peer Block on 26 times. More risks are starting to loom over a company that once could do no wrong.