Adyen Surprises on Hiring Again, but Investors With a Long-Term View Will Reap Rewards

Wide-moat Adyen reported 2022 EBITDA of EUR 728 million versus consensus expectations of EUR 821 million as collected by FactSet and our own EUR 800 million estimate, sending shares lower by about 15% at time of writing. The culprit behind the expectations miss is easily found in the elevated hiring pace Adyen followed during the year and especially so in the second half of 2022. While we had anticipated that Adyen will continue the elevated hiring pace it had kicked off in the first half of 2022, it added 395 full-time equivalents during that period—the payment provider had another 757 employees join its team in just the second half alone. This comes down to a whopping 53% headcount growth if we compare year-end figures, versus the 35% growth we had assumed for 2022. We surmise that the heightened hiring pace, while peers left and right are cutting or freezing hiring, and the resulting contraction in the EBITDA margin (55% in 2022 versus 63% in 2021) has the market feeling jittery on Adyen. We remain more constructive on Adyen’s outlook and believe that investors should take advantage of the current weakness in Adyen’s share price. Indeed, outside of the faster-than-expected hiring, performance for Adyen in the second half was in line with our expectations and our view of progression for the merchant acquirer. As such, we don’t expect to make a meaningful adjustment to our EUR 1,870 per share fair value estimate. Shares trade in 4-star territory. We laid out the core themes of our investment thesis in our Stock Pitch Report: “Adyen—As the market mulls Adyen’s outlook, investors should take advantage” published on Jan. 3, 2023, and believe that our thesis is fully intact even after the Feb. 8 announcement.