This report was generated using published research from our Financials team led by Sector Head Josh Steiner. If you want to access more Financials research, CLICK HERE.
COMPANY DESCRIPTION
Adyen's platform, known for its transparent fees, seamless onboarding, high transaction authorization rates, and quick-launch ancillary services, caters to multinational enterprises with omnichannel needs, enabling them to accept payments across all channels globally under a single acquiring relationship and access real-time business analytics.
TAKEAWAYS:
1. Best-in-Class Payments Company with Strong Secular Growth Backdrop
Having grown to its current size without the use of M&A speaks to the company’s immense value proposition within enterprise payments. With the still immense secular payments opportunity before it, Adyen is stewarded by a veteran and visionary management team who, refreshingly, are not drunk on share-based compensation and seek to create shareholder value through top-line growth and proper cost discipline while consistently operating within the frame of the company’s long-term strategy.
2. Global Quad 2 & HFL Inflation
A resurging goods economy and higher-for-longer inflation bode well for a reacceleration in baseline e-commerce volumes. Moreover, the rising probability of a domestic Quad 2 and modal Quad 2 outcome globally, with much of “the worst” behind Europe, points to a macro regime which has historically favored Adyen’s share price in both absolute and relative terms.
3. Easing Base Effects & Return to Positive Operating Leverage
Net revenue growth is poised to reaccelerate in 2024 as processed volume growth reaccelerates on easing base effects, while positive operating leverage returns in 2024 and achieves critical mass in 2025 and 2026 with the conclusion of Adyen’s elevated investment period in 2022 and 2023. With management operating with a heightened sense of conservatism, upside to guidance is the expectation, particularly as the U.S. market becomes more rational and the returns on the company’s countercyclical investment are realized.
FINANCIAL ANALYSIS
During the pandemic, Adyen's growth surged, attributed to its partnerships with high-profile clients like Tesla, Uber, LinkedIn, Meta, Adidas, H&M, Subway, and Booking.com, reinforcing its market position. Adyen is now the fastest growing payments company, meeting enterprise merchants' needs by accepting payments in any form, offering high payment authorization rates, fraud solutions, detailed reporting, and chargeback support, along with transparent pricing and vertical-specific products.
FINANCIAL PROJECTIONS
Key growth drivers include the rising complexity of global payments, the globalization of commerce, and the digitization of commerce, with e-commerce expected to account for 41% of global retail sales by 2027. In 2H23, digital volume increased by 33% year-over-year, with North America being the fastest-growing region due to strategic investments.
Despite competitive pressures and investment impacts on earnings in 2022 and 2023, Adyen's net revenue growth is projected between the low-twenties and high-twenties through 2026, with EBITDA margins above 50%, leveraging the company’s €8.3B cash balance for interest income (€300M annualized as of 4Q23).
