Paying for a new pair of jeans in a boutique with a credit card, paying for a burger at the counter with a smartphone or using PayPal to make an online purchase - Adyen has a hand in all these processes. The Dutch software company is active in the background with its solutions both in the e-commerce sector and at the store checkout and collects a fee for this. Adyen counts world-renowned companies such as Uber, Zalando, Netflix and, more recently, FC Bayern Munich among its wide-ranging customer base.
The fact that payment services are in demand is most easily seen in the development of Adyen's transaction volume. In 2021, this increased by 70% to EUR 516 billion, driven by the Corona pandemic. However, the company also remained on a growth course in 2022 - albeit no longer quite as dynamically. The volume climbed by 49% to EUR 767.5 bn. Ayden has recently been particularly successful in store checkout processing, which grew disproportionately and now accounts for around 16% of total business.
Although the growth curve continues to point upwards, the former high-flyer was punished on the stock market for its latest business figures. The stock slumped by around 15% on the day of the announcement. The Adyen share thus continues its volatile sideways course, which has now lasted for around a year. The reason for the share price slump is primarily the flattening growth rates. While the Dutch company was still able to increase its sales by 36% in the first half of 2022, the figure for the six months from July to December 2022 was "only" just under 30%. On the earnings side, the skid marks were even deeper. Ebitda improved in the second half of the year by a mere 4% to just under EUR 372 million. This figure was well short of the EUR 464 million expected by analysts. The below-average profit trend also caused the operating margin to fall from 64% in the previous year to 52%.
According to the company, there are various reasons for the comparatively weak performance. For one, high inflation and geopolitical instability made for a difficult time in the retail sector last year, and for another, the online payment provider is currently spending heavily on expansion. "Ayden is in investment mode," is the message from the Amsterdam headquarters. Among other things, personnel is being built up for this purpose. To increase efficiency in the executive suite, former CFO Ingo Uytdehaage has just been appointed co-CEO of the company alongside Pieter van der Does.
The new duo at the top remains true to Adyen's old habits of not providing an outlook for the coming quarters. Nevertheless, the company is still programmed for growth, as the recently confirmed medium-term outlook shows. The Dutch company is targeting a compound annual growth rate (CAGR) in sales of between 25% and 34% in the medium term. The Ebitda margin is expected to improve to more than 65% in the long term. From a regional perspective, the USA remains the growth area in the short term and will be complemented by expansion in the Asia-Pacific region in the medium term. The strategy is in line with current business performance: In the second half of 2022, North America generated revenues of almost EUR 191 billion, a whopping 45% increase. Asia-Pacific grew by 44% to EUR 78 billion. The core region continues to be Europe, Middle East and Africa contributing to more than half of the company's revenue.
The analyst guild was divided following the latest news from the company. While Goldman Sachs, for example, left the Adyen share on its highly regarded "Conviction Buy List" with a price target of EUR 2,300 after the figures, DZ Bank lowered its thumb to "Sell" and its fair value from EUR 1,500 to EUR 1,100. When looking at all 32 research studies listed by Refinitiv, however, the gleeful ones predominate. The average price target is currently EUR 1,625, which corresponds to a 12-month potential of one fifth.
However, the share price of the European blue chip does not have to be on the way up for the new Barrier Reverse Convertibles on Adyen to yield high profits. The products already promise double-digit percentage returns in the event of stagnating or moderately falling prices. Two Single Softcallable BRCs have been launched: The CHF variant offers the prospect of a maximum return of 13.50% p.a.; in EUR, even 15.50% p.a. is possible within the maximum term of 12 months. The attractive yield opportunities are combined with comfortable risk buffers of 41% each. The last time the Adyen share was at such a low level was in the Corona crash in spring 2020. The term can be shortened due to the soft callable function. The observation dates for this take place quarterly.
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