Adyen Plummets as Sales Miss Erases $20 Billion of Market Value

2023-08-18 02:20:03

Adyen Plummets as Sales Miss Erases $20 Billion of Market Value

The shares of Adyen NV, a Dutch payment processing company, took a nosedive as aggressive competition in North America led to the slowest revenue growth since its initial public offering. This single-day drop wiped out more than €18 billion ($19.6 billion) of market value.

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Shares of Adyen fell a record 40.6% to €875, reaching their lowest point since May 2020. Trading had to be halted multiple times throughout the day due to volatility.

Revenue Growth Disappoints

Pricing competition, higher inflation, and interest rates hampered revenue growth in the first half, according to a statement from the Amsterdam-based fintech firm. Net sales rose 21% to €739.1 million, missing the Bloomberg survey estimate of €776.5 million.

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Adyen had been steadily growing, with revenue rising by at least 26% each half since its listing in 2018. However, this recent setback, also impacted by inflation and rising interest rates, suggests that maintaining such growth momentum will be challenging.

Competition in North America

The company's growth in North America, which accounted for a quarter of its sales, was stunted as well. Revenue growth in the region more than halved to 23%. Adyen's Chief Financial Officer, Ethan Tandowsky, explained that their digital customers in the US have been prioritizing profitability over growth, which had an adverse effect on the company's performance.

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Tandowsky said, "In a market like this, some customers choose to see if they can find a lower-cost provider who could offer similar functionality."

Analyst Concerns and Future Outlook

Analyst Hannes Leitner from Jefferies expressed doubts about Adyen's ability to accelerate growth in the second half. He cited competition and currency headwinds as ongoing challenges.

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According to Bloomberg Intelligence, the disappointing net revenue figures for the first half add to concerns about Adyen's Ebitda margin not meeting expectations again. The company's hiring push and inflationary pressures affected its profit margin as well.

Adyen Stands Strong on Strategy

Despite the setback, Adyen remains committed to its long-term goals. It aims for an Ebitda margin above 65% and expects net revenue growth between the mid-20s and low-30s in the medium term. The company differentiated itself from competitors like Stripe Inc. and PayPal Holdings Inc. by emphasizing building a team that can realize its long-term potential rather than solely focusing on profitability.

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Co-Chief Executive Officer Pieter van der Does assured investors during an earnings call that the company does not plan to join the price fight by cutting costs. Van der Does stated, "We run at the lowest cost, so we could join the price fight. We don't think that's the right strategy."

Adyen's clients include major companies such as McDonald's Corp. and Hennes & Mauritz AB.

--With assistance from Henry Ren.

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