ADYEN: Prudence warranted from sector trends headwinds ADYEN NA

Today we published a note on Adyen, highlighting some of the sector trends we see at enterprise-level merchants and peers. We appreciate Adyen’s strong positioning in a market that will continue to see activity shift away from incumbent players, supporting Adyen’s high growth. Several market trends that we expect to become more prevalent going forwards, counter some of the key selling points of the Adyen platform. With this longer-term view, we believe many of the TPs on the street are too bullish. We reiterate our Reduce rating, though increase our TP to €2,250 based on increased eBay take-up.

- Adyen’s unified & integrated platform is its core selling point, though we see a trend of larger merchants bringing this technology in-house to benefit from owning the payment flow and client interaction. Booking.com, one of the key accounts mentioned by analysts at IPO, recently joined this internalization approach as well.
- Management has always been adamant about the fact that payments are not a commoditized service, with merchants focussing on other elements than pricing. Amazon recently announcing to not accept UK Visa credit cards due to costs throws up a strong counter example to that.
- Lack of overall stickiness in the payments sector cuts both ways. Onboarding new volumes is easily done, but those volumes can also move to competitors easily. All main peers of Adyen have some level of client lock-in either through consumer facing solutions (e.g. PayPal’s wallet) or added value services (e.g. Stripe & Square), something which Adyen is lacking.
- Our DCF valuation lands on an increased TP of €2,250 (up from €1,950); partially driven by increasing our eBay volume uptake estimates and rolling forward our DCF valuation. This leaves us just shy of warranting an upgrade to hold, sticking to our Reduce recommendation.