Adyen’s Stock Struggles: Is This a Smart Time to Buy?
Adyen (OTC: ADYE.Y) earned recognition in 2018 when eBay (NASDAQ: EBAY) selected the Dutch payment processor over PayPal (NASDAQ: PYPL). This key transition, spanning until 2023, positively impacted Adyen’s path while challenging PayPal’s performance. Initially, investors were optimistic, leading to Adyen’s shares hitting a split-adjusted peak of $32.74 on August 24, 2021. However, the stock now trades at around $16, significantly below its previous highs. As growth slows amid rising interest rates, one must ask: is Adyen’s stock currently a good buying opportunity?
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Image source: Getty Images.
What Makes Adyen Different from Its Rivals?
Unlike consumer-focused digital payment apps like PayPal or peer-to-peer services such as Venmo and Zelle, Adyen provides backend software. This platform integrates tools for processing payments, analyzing customer data, and managing finances into existing merchant systems, covering online, mobile, and in-store payments. Moreover, Adyen allows merchants to create their own digital wallets and issue cards.
Built on open-source technology, Adyen’s platform ensures compatibility with various payment systems, preventing merchants from becoming trapped in restrictive agreements. The platform supports over 250 payment methods, including credit and debit cards, mobile wallets, and other payment applications.
This flexibility likely influenced eBay’s decision to switch to Adyen, even when PayPal’s Braintree offered comparable backend services.
Adyen’s Recent Growth Trends
During 2021, Adyen’s processed volumes, revenues, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged as online shopping soared amid the pandemic. However, 2022 and 2023 saw a slowdown as the company contended with the fallout from its earlier rapid growth and new economic challenges.
|
Metric (in Euros) |
2019 |
2020 |
2021 |
2022 |
2023 |
1H 2024 |
|---|---|---|---|---|---|---|
|
Processed volume growth (YOY) |
51% |
27% |
70% |
49% |
26% |
45% |
|
Net revenue growth (YOY) |
42% |
28% |
46% |
33% |
22% |
24% |
|
Adjusted EBITDA growth (YOY) |
54% |
27% |
57% |
16% |
2% |
32% |
Data source: Adyen. YOY = year over year. 1H = first half. EBITDA = earnings before interest, taxes, depreciation, and amortization.
Simultaneously, Adyen increased spending to accelerate growth in North America and Asia. This combination of slower growth and higher costs led to a decline in investor confidence, pushing the stock down to a five-year low of $6.65 on October 27, 2023.
Encouragingly, in the first half of 2024, Adyen’s growth picked up again, with North America reporting a 30% revenue growth year-over-year, constituting 27% of its total revenue. The company’s core market in Europe, the Middle East, and Africa (EMEA), which accounts for 58% of revenue, also saw a 25% increase. Analysts predict that for the full year, revenue and adjusted EBITDA will rise by 22% and 30%, respectively.
Is Now the Right Moment to Buy Adyen Stock?
Forecasts indicate that Adyen’s revenue and adjusted EBITDA could grow at compound annual growth rates (CAGRs) of 24% and 32%, respectively, from 2023 to 2026. However, with an enterprise value of 43.7 billion euros ($45.2 billion), it appears relatively pricey at 17 times and 34 times its anticipated revenue and adjusted EBITDA for 2025.
Investors might find Adyen reasonably valued if they foresee interest rates decreasing, geopolitical issues like those in Ukraine and the Middle East easing, and continued growth in its North American market. Conversely, if these conditions don’t improve, the stock could drop further before becoming appealing. For optimistic investors, Adyen may be worth a modest investment at this price, though its stock will likely remain volatile and far from its peak values.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adyen, Block, PayPal, and eBay. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
