On Thursday, Adyen's stock tumbled 39%, costing the company 18 billion euros ($20 billion) in market capitalization. This is due to reported slowest revenue growth on record, as well as worries that competitive offerings in the North American market are undercutting the company. Before this, Adyen enjoyed consistent revenue growth of 26% every six-month period since its first trading in 2018 and had been viewed as a growth stock.
The euphoria surrounding Adyen's debut on the Amsterdam Stock Exchange in 2018 was quickly dampened as the company faced a number of challenges, being compelled to make significant adjustments to their growth strategy. This included expanding operations in North America and hiring new staff to ensure their survival. However, market conditions in 2023 have proven too difficult to keep up momentum and their revenue growth hit its lowest levels ever. To make matters worse, investors reacted swiftly, leading to a 39% decline in share prices and a total loss of 18 billion euros in market capitalization. These losses were compounded by a further 2.9% drop on Friday.
CNBC and Statista have identified Adyen as one of the world's top 200 fintech companies - a payments services firm that provides customers, such as Netflix, Meta and Spotify, with point-of-sale systems for physical stores, as well as online and in-store payments. Acting like a payment gateway, Adyen uses technology to allow merchants to accept card payments and transactions through their online stores, taking a commission from each transaction. Co-founded by Pieter van der Does, the firm's current CEO, and Arnout Schuijff, former CTO, this dynamic company continues to grow and expand.
Adyen last week reported results for the first half of the year that came significantly below expectations. The company's revenue of 739.1 million euros ($804.3 million) for the period was up 21% year over year — representing Adyen's slowest sales growth since its 2018 stock market debut. Analyst had been anticipating 853.6 million euros of revenue and 40% of year-on-year growth, according to Eikon Refinitiv forecasts.Adyen Chief Financial Officer Ethan Tandowsky told CNBC's "Squawk Box Europe" Thursday that due to increasing inflation and interest rates, there had been a shift in focus from growth to the bottom line. He also noted that the company saw "limited churn" and none of its major customers left the platform.However, worries that competitors in local markets, in particular in North America, are offering cheaper services have weighed heavily on Adyen's future prospects. The company revealed in its letter to shareholders this week that its EBITDA (earnings before interest, tax, depreciation and amortization) margin dropped to 43% in the first half of 2023 from 59% in the same period a year prior.Adyen explained this was due to weaker growth in North America and higher employment costs, like wages, as it increased hiring during the period.Tandowsky maintained that the company was focusing on "functionality" rather than its competitors' cheaper services, as he believed their efficiency in developing better functions would result in gaining a larger market share.
The downfall of Adyen lies in its reliance on clients who stay within one platform for their payments, and its need to demonstrate to those people that it has something better than competitors. In its half-year 2023 report, Adyen spoke of North American customers economizing due to increasing interest rates and inflation. They commented that companies are transitioning over to online payments in order to save money, instead of focus on features. Nonetheless, the company said it still prices competitively for the value it provides. As a result of scaling up its hiring, EBITDA dropped 10% from the same period of 2022. Adding 551 staff over the same timeframe, Adyen's total full-time staff rose to 3,883. In contrast, rivals, such as Stripe, have drastically cut back on hiring. Adyen's main challenge is to contend with competitors who offer lower rates. Speaking with the Financial Times on Thursday, Adyen CEO Pieter van der Does stated that organizations are trying to find local providers to save money. "We're just growing at a slower rate," he added. Adyen has usually operated with a smaller staff than Stripe, clocking in at twice the amount. Simon Taylor of Sardine.ai said Adyen might have difficulty in reaching an even higher peak of business without bringing down its margins. Taylor concluded by saying that, while Adyen is subject to similar economic hardships like all companies in the e-commerce sector, the company still saw a growth of 21%.
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