Adyen’s
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
€1,660
per
share
from
€1,870.
With
shares
trading
around
€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.
While
EBITDA
margin
compression
to
43%
this
quarter
and
price
competition
in
North
America
paint
a
cloudy
picture
for
Adyen
today,
we
would
caution
investors
not
to
extrapolate
this
snapshot
too
far
into
the
future.
We
made
this
point
to
investors
during
the
pandemic,
when
the
sky
was
blue
and
shares
were
scratching
at
the
€3,000
mark,
and
we
reiterate
a
similar
sentiment
today.
We
expect
margins
to
start
expanding
again
next
year
when
Adyen
slows
its
hiring
push
and
its
scalability
will
show
again
in
its
numbers.
We
believe
management
will
be
reluctant
to
give
in
to
any
price
wars,
even
if
that
seems
to
be
what
the
market
demands.
As
such,
investors
in
Adyen
will
have
to
withstand
another
six-to-12
months
of
bears
driving
the
narrative
and
share
price
before
we
believe
the
gap
to
our
fair
value
estimate
is
likely
starting
to
close.
This
is
an
edited
version
of
a
Morningstar
note
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