Europe’s fintech darling Adyen lost $20 billion of its market cap in just one day
Adyen was once named one of the top 200 global fintech companies globally, according to Statista. Now Europe’s fintech darling is facing the fight of its life.
In 2018, Dutch payments startup Adyen made its debut on the Amsterdam stock exchange with fanfare. At that time, the company was benefiting from the robust expansion of Europe’s technology industry and was also successfully acquiring competitors, positioning itself against its major US rival, PayPal.
However, the journey for Adyen since then has been far from smooth. The company had to navigate through challenging times, including the disruptive impact of a global pandemic that significantly reduced transaction volumes from its travel-focused clients.
Fast forward five years later, the broader economic landscape has changed with rising interest rates and a global economic downturn and Adyen encountered substantial hurdles to its growth strategy.
Last Thursday, Shares of Adyen plummeted 39%, wiping off 18 billion euros ($20 billion) from its market capitalization in a single day as investors dumped the stock after the company reported its slowest revenue growth on record. The bloodbath didn’t stop there. Following the steep drop on Thursday, Adyen’s stock experienced an additional decline of 2.9% on Friday.
What is Adyen?
Adyen is a Dutch-based global payment technology firm that provides businesses with a platform to accept and process various forms of electronic payments. The company was founded in 2006 by a group of entrepreneurs, including Pieter van der Does (CEO) and Arnout Schuijff (CTO). Their mission was to create a seamless payment solution for both online and offline transactions.
Adyen’s platform encompasses a wide array of payment services, spanning online, point-of-sale, and mobile payments. Merchants can accept payments through diverse means, including credit cards, debit cards, digital wallets, bank transfers, and local payment methods. This flexibility enables businesses to cater to a diverse global customer base.
One key feature of Adyen is its focus on unifying online and in-store transactions, enhancing consistency and operational efficiency, ultimately leading to improved customer satisfaction.
Adyen doesn’t just stop at online payments; it also provides point-of-sale systems for brick-and-mortar stores. It covers both online and in-store transactions. Beyond being a simple processor, Adyen functions as a payment gateway. This means it leverages technology to empower merchants to process card payments and transactions on their online stores. For the service it provides, Adyen takes a small percentage of each transaction that goes through its platform.
The company’s success hinges on its commitment to innovation, security, and user experience. Adyen prioritizes data security and compliance with international payment standards, given the sensitive nature of payment data. Through rapid growth and strategic partnerships, Adyen garnered attention and a diverse clientele, including major brands like Airbnb, Uber, Spotify, Microsoft, and others.
In 2018, Adyen marked a significant milestone by going public through an initial public offering (IPO) on the Amsterdam Stock Exchange. This move provided funds for the expansion and ongoing development of their payment technology.
What happened to Adyen?
Adyen’s recent earnings report for the first half of the year fell short of expectations, revealing revenue of 739.1 million euros, a 21% increase compared to the previous year. However, this growth marked the company’s slowest sales expansion to date.
Analysts were expecting revenue of 853.6 million euros and year-on-year growth of 40%, according to Refinitiv Eikon forecasts. Historically, Adyen has been seen as a growth-oriented stock due to its consistent 26% revenue growth in each half-year period since its stock market debut in 2018.
“With higher inflation, leading to higher interest rates, there has been a bit of a shift of focus — less focus on growth, more focus on the bottom line,” Adyen’s chief financial officer, Ethan Tandowsky, told CNBC’s “Squawk Box Europe” on Thursday.
Tandowsky also added that Adyen had maintained strong customer retention (“limited churn”) and hadn’t lost any major clients from its platform.
However, concerns have arisen due to increased competition from local players, especially in the North American market, offering more budget-friendly alternatives.
Adyen’s shareholder letter from the previous week highlighted a decline in its EBITDA margin, dropping to 43% in the first half of 2023 from 59% in the same period the previous year. The company attributed this decrease to milder growth in North America and higher labor costs, driven by increased hiring efforts.
Tandowsky affirmed that Adyen’s primary focus is on functionality rather than solely on cost, even if some competitors offer more economical services. He stressed the importance of efficiently developing superior features that would help the company gain the expected market share.
“The efficiency of which we can develop new functionality, functionality that outperforms our peers will lead us to gaining the market share that we expect.”