Link to our full article posted on November 16th, 2022: Adyen: Growing Company With Competitive Differentiation But Limited Upside
Adyen (OTCPK: ADYEY) is an integrated payment processor, which takes both gateway and acquirer roles. Adyen initially solely focused on serving enterprises but is now shifting its focus on the underserved SMB market. In addition to the proliferation of e-commerce, we believe that the global layoff will encourage people to start new businesses.
Yet the landscape is highly competitive, as other players, like Adyen, are eyeing the SMB market and providing embedded financial products. However, we believe that Adyen has an upper hand because it provides more local payment options, especially from the APAC market, and of its competitive pricing for merchants in countries with interchange fee cap.
Lastly, at the time of writing, the stock is trading at 67x EV/EBITDA. In addition, our 10-year DCF model (9.4% WACC; 3% terminal growth) suggests that the stock has limited upside, with our base case scenario standing at $18 per share.
All in all, we like Adyen’s incredible growth, ability to generate profits and cash, and above-average ROE. Nevertheless, the current price does not provide a sufficient margin of safety. Hence, we rate the stock as “HOLD.”
Picture source: StockSnap – Pixabay