Earnings Outcomes: Adyen shares fall after COVID-19 pressures travel-related income

Shares of European payment processor Adyen NV dropped in Thursday trading after the company delivered a mixed first-half earnings report. Results were weighed down by the company’s exposure to travel-related businesses.

reported revenue of €279.9 million for the first half of 2020, up from €221.1 million a year earlier and ahead of the €283.6 million FactSet consensus. The company fell short of expectations with its earnings before interest, taxes, depreciation, and amortization (Ebitda), however, which came in at €140.9 million while analysts were expecting €146 million.

The shares fell 2.7% in Thursday’s session.

“Despite tremendous online growth over 50% (versus January levels), Adyen still felt the sting from both in-store point of sale and travel,” wrote Susquehanna’s James Friedman, who rates the stock at positive with a €1,700 price target. “That said, their pipeline is robust, they continue to board new clients, and their online presence grows ever more strategic.”

Read: Visa says COVID-19 crisis could help drive $100 billion annual shift to debit cards over time

Keefe, Bruyette & Woods analyst Sanjay Sakhrani took a similar view in a note to clients. “While the pandemic is having some near-term impacts on Adyen (given exposure to travel verticals and point-of-sale volume to an extent), management’s confidence in the long-term growth opportunity is as strong as ever, and underscored by continued ramp up in investments to capitalize on the ongoing tailwinds.”

He rates the stock at outperform with a €1,682 target price.

The company added 266 full-time equivalent employees in the first half of 2020 and the company’s hiring plans were a key focus of Adyen’s earnings call with investors. “As revenues and costs are basically unrelated, we need to invest in the future to make sure that we are ready for additional growth in the future,” Chief Financial Officer Ingo Uytdehaage said in response to one hiring-related question on the call.

Chief Executive Pieter van der Does told MarketWatch that the company helped transition some retailers that were previously reliant on in-person sales over to digital tools once the pandemic forced store closures. He gave the example of a “high-touch” luxury retailer that previously depended on customers who were able to feel the product before buying it. Adyen rolled out text-to-pay and other options for such retailers so that they could adapt to online selling more quickly at the height of the crisis.

Though stores across categories have generally reopened, van der Does said that Adyen has so far seen that some of the incremental volume that moved online during the worst of the pandemic has stayed online. Payments companies have been hopeful that the COVID-19 crisis will drive longer-term shifts in consumer behavior that lead to greater e-commerce usage even after the pandemic subsides.

More than 80% of Adyen’s growth comes from existing merchants, and van der Does said many begin using the payment processor in one market before eventually transferring more of their volume over to Adyen. He sees that growth as sustainable, arguing that the company’s “secret sauce” is its ability to outperform competitors by running the business on a single interface that delivers a better experience, in his view, over rivals that have different solutions for different markets.

Adyen shares have risen 94% so far this year as the Amsterdam AEX index
has declined 8.6%.

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