Adyen shares jump 33% after long-term targets set

By Steve Goldstein

Shares of payment processing firm Adyen vaulted higher on Thursday, after the company's long-range outlook was surprisingly positive.

Adyen shares (NL:ADYEN) gained 33% -- still keeping the company's stock well below levels after its downbeat first-half report -- as it said revenue rose 22% in the third quarter, and processed volumes rose 21%, in an update ahead of an investor presentation.

That rate of growth matched its first-half performance, when revenue rose 21% on 23% growth in processed volumes. At the time, it had warned that digital businesses in North America were focusing on profit rather than growth, and also that it had struggled to hire enough talent.

Adyen says it brought on 175 full-time employees in the third quarter, and it may hire just as many people in the fourth quarter, before scaling back hiring next year. Analysts at Stifel pointed out that the company hired 550 people in the first half, so the reduced rate of expansion should help margins.

Adyen also said it's aiming to grow revenue in the low to high 20% range annually through 2026 and aims to improve operating margins above 50% in 2026.

Analysts at Wells Fargo made a double upgrade on Adyen from underweight to overweight.

"Prior to today we thought Adyen would be a low 20% revenue grower with EBITDA margins remaining below 50% for the foreseeable future (given 1H23 pressure and ramping investments). With new building blocks provided by management on the path back toward high-20% revenue growth through 2026, and third-quarter strength with an implied fourth-quarter acceleration, we think Adyen is well positioned to come out on top after investing through a down cycle (historically a winning strategy)," said the analysts.

Adyen shares have dropped 28% this year.

-Steve Goldstein

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11-09-23 0936ET

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