A premium business down over 50%
Jamie Louko (Adyen): Inflation has been soaring around the world, and that is impacting many stocks across industries. Inflation in the European Union is nearing 11%, while the U.S. has inflation above 8%. Many investors believe that a worsening economy will result in lower consumer spending activity. Based on this assumption, investors have sent Adyen stock lower: Shares of the digital payments processor are down 56% from their all-time high.
While this idea makes sense in theory, reality hasn’t told the same story. Despite the uncertain macro environment in the U.S. and Europe, Adyen has continued to see strong adoption of its services. Processed volume jumped 60% versus the year-ago period to €346 billion in the first half of 2022, which helped revenue soar 37% to €608.5 million. The global economy might be in a precarious position now, but Adyen doesn’t seem to see any indication of that.
One reason the company might be seeing such resilience is that it is continuing to make notable partnerships with companies to process digital payments. Since the company reported earnings in August, Adyen has announced four new partnerships with companies across the world to process their digital payments.
Shares might be down, but Adyen’s valuation is still expensive on an absolute basis. Adyen trades at almost 47 times enterprise value to EBITDA, while rivals like PayPal (NASDAQ: PYPL) only trade at 25.5 times. What you’re getting for this 84% premium, however, is a higher quality business. Not only is Adyen growing revenue faster than PayPal -- revenue only increased 9% year over year in Q2 for PayPal -- but you’re also getting a company with higher profit margins and more cash on the balance sheet to withstand a rough period if one comes soon.
Adyen looks like a super stock to own if you don’t already own shares. Don’t let its valuation sway you: This company is one worth owning for the long haul today.
