Adyen: Earnings Call Did Not Appease the Market but the Reaction Is Exaggerated; Shares Cheap

Adyen’s ADYEN earnings call did not seem to ease investors’ concerns, as its share price continued to slide during the call, ending close to 40% down for the day. Although we agree that management was too soft on potential rectifications of what the market believes to be a step change in Adyen’s outlook, we think the selloff is exaggerated. We took a fresh look at our model and pulled down our revenue growth estimates, now assuming that Adyen will see growth decline further in the digital segment, albeit still double-digits until 2029. We also adjusted our cost assumptions up slightly to account for the additional hiring expected this year and the lagging effect of this hiring, which will weigh on margins through 2024. On the flip side, we lifted our interest income assumptions, which is a nice boost to Adyen now that rates have left close-to-zero territory for good, offsetting some of its investments into staff. Taken together, our changes lower our fair value estimate to EUR 1,660 per share from EUR 1,870. With shares trading around EUR 900, we view Adyen as cheap. Moreover, we believe our assumptions of 22% revenue growth over the next five years and 16% over the next 10 years leaves room for surprises to the upside. To reach our fair value estimate, Adyen can miss its mid-20s percent revenue CAGR and above 65% EBITDA margin guidance for the medium term.