Record low sales growth causes stock to plummet by 28%

Shares of Adyen, the European payments giant competing with U.S. titan Stripe, experienced a significant drop of almost 28% on Thursday following disappointing sales and a decline in profit during the first half of the year.

Let’s take a look at how the company performed:

• Revenue for the period of January to June 2023 reached 739.1 million euros ($804.3 million), showing a 21% increase compared to the previous year. However, this fell short of analysts’ estimates of 853.6 million euros in revenue and a year-on-year growth of 40%, as reported by Eikon data.
• EBITDA (earnings before interest, tax, depreciation, and amortization) amounted to 320 million euros, down 10% from 356.3 million euros in the first half of 2022. This aligns with analysts’ prediction of 320 million euros in profit for the first half of 2023.

Adyen attributed this underwhelming performance to increased hiring and higher wages, as well as a change in the business priorities of their North American customers, who shifted their focus from growth to cost savings in the first half of the year.

The company experienced much slower sales growth compared to the same period in the previous year, where revenues grew by 37%.

Ethan Tandowsky, Adyen’s CFO, stated in an interview with CNBC’s “Squawk Box Europe” on Thursday, “We’ve been quite open that since the beginning of 2022 we really want to invest in the business and to do that we needed to grow the team. We see a real opportunity in payments and in the financial services space.”

With a market capitalization of 35.4 billion euros, Adyen is one of Europe’s largest fintech firms. The company provides payment services to industry giants such as Netflix, Meta, Microsoft, and Spotify.

Adyen also mentioned that inventory write-offs had a negative impact of 6.3 million euros on their EBITDA.

It competes directly with established online payment platforms like PayPal, Stripe, Block (formerly known as Square), and Fiserv.

Adyen, along with other payment companies, initially benefitted from the increased demand for e-commerce and digital payment options brought about by the Covid-19 pandemic and subsequent lockdowns. However, these companies have faced challenges due to various economic factors, including the Russia-Ukraine war, higher interest rates, rising inflation, and a global slump in equity markets.

Fintech companies have fallen out of favor with investors as a high-interest rate environment reduces the appeal of growth-oriented companies that rely on raising capital.

Adyen primarily generates revenue from a small percentage of the transactions made by merchants. The payments market is highly competitive, with numerous players vying for market share.

As identified by CNBC and Statista, Adyen is recognized as one of the top 200 global fintech companies, and it believes that its unified single payments platform, offering a range of services such as debit cards, buy now, pay later options, and popular mobile wallets like Google Pay and Apple Pay, will provide merchants with a competitive edge.