How Adyen's Valuation Dropped by $20 Billion Overnight

How Adyen’s Valuation Dropped by $20 Billion Overnight

Time Stamp: August 21, 2023 5:48 AM
Source Node: 2226343

After the
Amsterdam-listed payment company, Adyen (EURONEXT: ADYEN) published financial
results last week that disappointed investor expectations, its stock took a
significant hit. The depreciation was so severe that the fintech’s valuation
shrank $20 billion in just one day. In the new week, the declines continue,
with share prices falling back to the pandemic lows of April 2020.

At first
glance, Adyen’s report might seem optimistic. The company increased processed
volumes 23% year-on-year and increased its net profit €130 million to €739
million. However, analysts and investors were alarmed by a five-fold decline in
revenue, which contracted from €3.95 billion to €854 million in the first half
of 2023.

The
market’s reaction was immediate. Adyen shares plummeted nearly 39% on the
Amsterdam stock exchange on Thursday, reducing the company’s valuation by €18
billion ($20 billion). On Friday, the stock lost another 3%; on Monday, it
declined 5%, touching the lowest levels since the start of the Covid-19
pandemic.

Adyen stock price crash. Source: Yahoo Finance

Until now,
investors have regarded Adyen as a growth stock, consistently reporting an
average revenue growth of 26% every six months since its stock market debut
over five years ago. This momentum is now clearly disrupted, raising concerns
that competitors promoting aggressively cheaper services may negatively impact
Adyen’s future.

Consumer Issues and
Competitive Challenges

When Adyen
went public in 2018, many viewed it as a serious competitor to the American
payment giant, PayPal. The company, which processes payments for services like
Netflix, Spotify, and Meta, serves as a payment gateway and processor,
collecting small fees from each transaction.

According
to company representatives, many customers began to cut their spending due to
high inflation and economic pressure. Fewer transactions by consumers mean less
revenue for Adyen.

Adyen’s
situation is further complicated by competitors offering lower rates than the
Amsterdam-based company. Merchants prefer to use smaller, local payment service
providers, negotiating more attractive rates with them.

However,
Adyen’s CEO, Pieter van der Does, has remained optimistic and has tried to reassure
investors. He insisted that his company is not downsizing but simply growing slightly
slower.

Fintechs in Distress

Globally,
fintechs have little reason to cheer. This is evident in Europe, where a
significant drop in funding was recorded in the first half of 2023. In the
second half of 2022, fintech funding reached $63.2 billion across 2,885
transactions. However, the first half of 2023 saw a decline to $52.4 billion in 2,153 transactions, according to the Pulse of Fintech report by KPMG. These
figures indicate a substantial decrease in overall funding and transaction
volume.

Another
report released in early July by Innovative Finance has confirmed this. By their
calculations, total capital investments amounting to $27.3 billion across
1,714 transactions represent a drop of 14% compared to the second half of 2022.
Globally, funding in the financial technology sector has fallen 30% this
year to $95 billion.

After the
Amsterdam-listed payment company, Adyen (EURONEXT: ADYEN) published financial
results last week that disappointed investor expectations, its stock took a
significant hit. The depreciation was so severe that the fintech’s valuation
shrank $20 billion in just one day. In the new week, the declines continue,
with share prices falling back to the pandemic lows of April 2020.

At first
glance, Adyen’s report might seem optimistic. The company increased processed
volumes 23% year-on-year and increased its net profit €130 million to €739
million. However, analysts and investors were alarmed by a five-fold decline in
revenue, which contracted from €3.95 billion to €854 million in the first half
of 2023.

The
market’s reaction was immediate. Adyen shares plummeted nearly 39% on the
Amsterdam stock exchange on Thursday, reducing the company’s valuation by €18
billion ($20 billion). On Friday, the stock lost another 3%; on Monday, it
declined 5%, touching the lowest levels since the start of the Covid-19
pandemic.

Adyen stock price crash. Source: Yahoo Finance

Until now,
investors have regarded Adyen as a growth stock, consistently reporting an
average revenue growth of 26% every six months since its stock market debut
over five years ago. This momentum is now clearly disrupted, raising concerns
that competitors promoting aggressively cheaper services may negatively impact
Adyen’s future.

Consumer Issues and
Competitive Challenges

When Adyen
went public in 2018, many viewed it as a serious competitor to the American
payment giant, PayPal. The company, which processes payments for services like
Netflix, Spotify, and Meta, serves as a payment gateway and processor,
collecting small fees from each transaction.

According
to company representatives, many customers began to cut their spending due to
high inflation and economic pressure. Fewer transactions by consumers mean less
revenue for Adyen.

Adyen’s
situation is further complicated by competitors offering lower rates than the
Amsterdam-based company. Merchants prefer to use smaller, local payment service
providers, negotiating more attractive rates with them.

However,
Adyen’s CEO, Pieter van der Does, has remained optimistic and has tried to reassure
investors. He insisted that his company is not downsizing but simply growing slightly
slower.

Fintechs in Distress

Globally,
fintechs have little reason to cheer. This is evident in Europe, where a
significant drop in funding was recorded in the first half of 2023. In the
second half of 2022, fintech funding reached $63.2 billion across 2,885
transactions. However, the first half of 2023 saw a decline to $52.4 billion in 2,153 transactions, according to the Pulse of Fintech report by KPMG. These
figures indicate a substantial decrease in overall funding and transaction
volume.

Another
report released in early July by Innovative Finance has confirmed this. By their
calculations, total capital investments amounting to $27.3 billion across
1,714 transactions represent a drop of 14% compared to the second half of 2022.
Globally, funding in the financial technology sector has fallen 30% this
year to $95 billion.

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