Adyen: Growing Company With Competitive Differentiation But Limited Upside

Nov. 16, 2022 4:21 PM ETAdyen N.V. (ADYEY), ADYYFSQ, SHOP, SHOP:CA4 Comments
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Summary

  • The online payment industry is expanding. E-commerce is gaining traction and more people are building new businesses.
  • Adyen N.V.'s broad local payment methods and competitive pricing will pave the way for the company to penetrate the fast-growing markets and acquire SMBs.
  • In addition, we like Adyen because it is growing at an incredible rate, a profitable, cash-generating business, and running at a respectable ~30% ROAE.
  • But our 10-year DCF model suggests that Adyen's stock at its current price does not provide a sufficient cushion. The stock is attractive if it hits ~$13 per share (base case), in our view.
  • Risks include a highly competitive industry and lack of experience in handling platforms and SMBs compared with Stripe.

Young woman with credit card and laptop

Nastasic

Investment Thesis

We believe that the growth of e-commerce and the rise of new small-medium businesses ("SMBs") will be tailwinds for Adyen N.V. (ADYEY, ADYYF) in the next few years. Adyen's broad local payment methods and competitive pricing will pave the way for the

Adyen's value chain vs. traditional one

Adyen's value chain vs. traditional one (Company)

How Adyen monetizes its value chain

How Adyen monetizes its value chain (Company)

Old reporting structure

Old reporting structure (Company)

New reporting structure

New reporting structure (Company)

Adyen's processed volume details

Adyen's processed volume details (Company)

Adyen's terminal

Adyen's terminal (Company)

Adyen's Tap-to-Pay

Adyen's Tap-to-Pay (Company)

Adyen's new embedded financial products

Adyen's new embedded financial products (Company)

The North America and APAC markets are gaining traction

The North America and APAC markets are gaining traction (Company)

E-commerce is expected to take up more share

E-commerce is expected to take up more share (Statista)

Business applications in the US

Business applications in the US (FRED)

Google trend on the word "start business"

Google trend on the word "start business" (Google)

Total processed volume ($ billions)

Total processed volume ($ billions) (Companies)

Stripe Treasury

Stripe Treasury (Stripe)

Block's products

Block's products (Block)

Take rate declines as Adyen brings in more volume

Take rate declines as Adyen brings in more volume (Company, Vektor Research)

EBITDA margin declining

EBITDA margin declining (Company, Vektor Research)

Adyen's full-time equivalents

Adyen's full-time equivalents (Company, Vektor Research)

Adyen's expanding FCF

Adyen's expanding FCF (Company)

Chart
Data by YCharts

Adyen and peers forward EV/EBITDA

Adyen and peers forward EV/EBITDA (Koyfin)

Adyen and peers forward P/E

Adyen and peers forward P/E (Koyfin)

Adyen DCF valuation (Base case)

Adyen DCF valuation (Base case) (Vektor Research)

Adyen consensus revenue revision trend

Adyen consensus revenue revision trend (Seeking Alpha)

Scenario summary

Scenario summary (Vektor Research)

Half-year results comparison

Half-year results comparison (Company, Vektor Research)

This article was written by

Vektor Research profile picture
208 Followers
An independent research that aims to produce in-depth fundamental analysis accessible to all investors. For now, we will cover a group of stocks in within the same sector to provide investors with more comprehensive analysis. At times, however, we will write about companies with wide moats and sold at reasonable prices, those that fall out of favor but still retain a turnaround story, and smaller companies that are not well-known by the market but hold significant upside.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Research reports are written based on analyst(s) analysis and expectations, and the analyst(s) must include sources for external data included in the analysis. The research analyst is not responsible for any inaccuracy caused by human errors. Still, Vektor Research will make sure, with reasonable efforts, to reduce such mistakes as minimal as possible. Please note that the forecasts do not guarantee any future performance. Vektor Research, along with the analyst(s), is not responsible for any loss, expenses, and the reader's decision-making, as we do not force readers to act towards any securities.

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