Adyen N.V. ADR (ADYEY, $28.04) “Adyen, Amsterdam’s Ace”
By: Brett Selke, AIM Student at
Marquette University
Summary
- Adyen N.V. ADR (OTC: ADYEY) is
a Dutch payment processing company allowing businesses to integrate and accept point-of-sale,
e-commerce, and mobile payments. Its geographic revenue mix is: Europe (60% of revenue),
North America (22%), APAC (9%), and LATAM (~8%). Adyen is continuing to see
incredible growth from the United States, net revenue from the region increased
80% YoY.
- Adyen is continuing to expand into new geographic markets. Since February, it has expanded its business to Singapore, Japan, and the United Arab Emirates. Additionally, it has continued to add new merchants such as Slice, Shiji, and Dick’s Sporting Goods.
- MSCI upgraded its ESG rating from BB to A on June 28th citing Adyen’s improved sustainability efforts. Adyen added a new feature called Restore that allows customers the ability to pay merchants a slightly higher fee in return for offsetting the customer’s carbon footprint via a more sustainable delivery method.
- The US Federal Reserve granted Adyen a US federal branch license in San Francisco, California. The Office of the Comptroller of the Currency still has to approve the license. Adyen has had a pan-European banking license since 2017.
Key
points
Adyen was pitched and added
to the AIM International Fund in February of 2021. Since then, the company
announced both its 2020 yearly earnings and its 2021 1H earnings. In 2020 Adyen
reported $3.6B in revenue and $261M in net income, increases of 37.1% and 11.4%
YoY respectively. However, its 1H
financial results were a mixed bag. Investors were optimistic that Adyen’s new
merchants would contribute substantial revenue growth however, approximately
80% of revenue was generated from existing merchants. Additionally, net income
growth for 1H 2021 was 12.1%, whereas net income growth for 2H 2020 was 86.6%.
Adyen still had a terrific 1H 2021, investors estimate’s and outlook merely came
back down to earth after its earning call.
Adyen announced a
partnership with Afterpay, a global leader in the BNPL space to further improve
its product offering to merchants. Almost immediately, Afterpay was integrated
into Adyen’s product and drove revenues in H1 2021 to increase by 22.7% and
63.7% HoH and YoY respectively. However, Square announced in August that it
would be acquiring Afterpay in a deal expected to be finalized in Q1 of 2022.
Due to Square being a competitor of Adyen, it is unknown if Afterpay’s
partnership with Adyen will continue.
The thesis drivers
regarding the rise in e-commerce and merchant expansion are still intact. The
COVID pandemic has caused many businesses around the world to move away from
point-of-sale payments and accept mobile and e-commerce payments. Adyen has
seen a twofold increase in point-of-sale transaction volume YoY however, it
still makes up only 11% of all transactions. Adyen has continued to add more
merchants and expand into new regions which will increase revenues over time.
There has been no further development in the network token driver, although
Adyen has been working on improving quality of life for its merchant’s
customers and improving compliance strength. Adyen has improved its compliance
strength through its risk engine and a compliance machine learning tool named
Score. Adyen also launched Restore, which is a sustainability tool merchant’s
customer can use to reduce their carbon footprint.
What has
the stock done lately?
Adyen was pitched and added
into the AIM fund at a price target of $60.05. The company announced on August
24th a 2-for-1 stock split, thereby reducing the price target to
$30.03. A stock split is a very optimistic signal to investors. September was
an uneventful month for the company and the stock has corrected itself the last
few weeks after a whirlwind August.
Past Year
Performance
Adyen
has returned 31.4% since being added to the international portfolio. ADYEY has
increased 50.5% in value in the past year and 22.13% YTD. The stock took a dive
in May due to some headlines, but the announcement of the Fed granting them a
charter was the catalyst Adyen needed. Since that announcement the stock has
gone up 21.75%.
There is a plethora of
reasons to be excited about the future of Adyen, two of the original drivers in
e-commerce growth and merchant expansion are standing strong. Its
sustainability initiative and Fed branch license are two additional potential
drivers for the company in the long-term. The street continues to be bullish on
the company with an average upside of 12%. The AIM International portfolio
should continue to hold their position in Adyen.
