Is Adyen a good stock? Why is Adyen so high? Is Adyen Overrated? From the list of search suggestions that Google rolls out for you, it immediately becomes apparent that many people turn to the internet for advice about this fintech company that processes online payments.
Adyen is a pearl on the Dutch stock exchange: rare and precious. In one year, its value more than doubled: from 820 euros in January 2020 to more than 1,900 euros in January of this year. A peak of 2,200 euros followed in February. Since then, the price has fluctuated between 1,700 and 2,100 euros.
According to stock analyst Corné van Zeijl of Actiam, the stock price is a bit rippling, especially given the turbulent growth of last year, because growth stocks are interest-sensitive. In view of a possible rate hike, which was expected in the US in recent months, it is not surprising that Adyen’s share price is stagnating. Van Zeijl: “You see that many tech stocks do a little worse under those circumstances.”
Amsterdam-based Adyen broke through worldwide when it was the first major customer to bring in Groupon – known for its discount coupons. Adyen now has an impressive customer base. A small selection: Spotify, Netflix, Airbnb, Facebook, Uber, Amazon, eBay. A large part of those customers also turned out not to be sensitive to the corona crisis. In fact, they actually took advantage of it.
Although Adyen experienced a small dip in the second quarter of 2020 due to the loss of travel payments (think: Airbnb), this was more than made up for by the increase in online banking, shopping and business. Some weeks ago JPMorgan analysts estimate that the increase in the number of transactions via eBay Adyen marketplace alone could generate 16 percent annual growth. Adyen’s revenue growth in the first half of 2021 will therefore be higher than the generally expected 40 percent, according to those analysts.
Still, it’s not surprising that people are hesitant to buy Adyen shares. The company is performing well, but the stock is very highly valued.
“Adyen is a difficult company,” confirms Van Zeijl. Yes, it is showing good numbers and it is exceeding earnings expectations time and time again. For example, in 2020 the company achieved a quarter more turnover and 11 percent more profit than the year before. The fact that Adyen built the entire payment system himself and is not ‘something acquired together’ makes the company unique and well positioned as far as Van Zeijl is concerned.
But now it’s about scale, he says. “Adyen’s ‘pipeline’, through which all payments go, is already in place. Whether you make one or two transactions, it doesn’t matter to the system.” In other words, growth is possible with minimal additional costs. In fact, Adyen only needs to attract new customers. Van Zeijl: “The margin on all extra turnover will then approach 100 percent.”
“But,” he says, “it is an extremely expensive stock.”
Martine Hafkamp of asset manager Fintessa does not think ‘expensive’ is the right word. In fact, this is about the high price-earnings ratio: the share price divided by the expected earnings per share. Hafkamp: “For Adyen, it stands at 224. Mastercard, a company that also processes payments, stands at 57.5.”
If Adyen can live up to the growth expectations, then the stock is not as ‘expensive’ as it seems now. “Digitalization continues, eventually we might go to a world without cash.”
In addition, Hafkamp points to growing competition from Mollie, Klarna and Stripe, among others. “With such a high price-earnings ratio, there is little room for setbacks for investors who are still entering Adyen now.”
A version of this article also appeared in NRC in the morning of June 14, 2021