Adieen(OTC: Adye.Y) He was a huge beneficiary during the Covid-19 pandemic. Like other pandemic beneficiaries, this tailwind caused a headache in payment processors in 2022 and 2023, with inventory dropping by 75% from an all-time high. The stock has recovered slightly, but as of this writing in early February it is still down about 50% from its high.
Unlike other pandemic high flyers whose competitive advantages are eroding, Adien’s business is actually going well and well today, poised to continue growing in the coming years. This is why investors should consider purchasing financial technology giants before fourth quarter revenues are released on February 13th.
Payment is a monster and confused industry. When you swipe your card or make payments online, there may be 12 services that work to approve and fulfill transactions.
The founders of Adyen were aiming to improve these mashed services with a vertically integrated payment processor. Currently, this is one of the biggest players in the industry, but this philosophy still explains Adien. With a full-fledged solution built from scratch for modern online payments, Adyen’s payment success rate is much higher than its industry peers, leading to customer victory and happiness.
Starting with online payments in Europe, Adyen is now expanding to almost all payment processing categories worldwide. You want to be a one-stop shop for payment partners, which is usually a large platform. for example, Spotify and Uber Both will be performed with Adyen’s payment. This requires you to be there with some of the most complicated payment solutions in the world. Ordering Uber at 99.99% of the time makes the payment process seamless in various countries. This is the beauty of Adyen’s latest payment processing software.
Adyen started with a competitive advantage with the latest technology, but increasingly increasingly increasing new competitive advantages on scale. why? This is because it can drive lower prices than its high-end competitors. In 2015, Adyen paid less than $35 billion annually. In 2023, we processed more than $1 trillion in payments. As this grows, the company is able to lower prices while maintaining a high profit margin thanks to its fixed cost structure and high incremental profit margins.
Another fascinating quality about Adieen is its culture of discipline. Perhaps because its headquarters are far from Silicon Valley, the company distributes costs far more than other financial technology players. This has led the company to achieve EBITDA (Earnings before interest, taxes, depreciation and amortization) Margin exceeding 50% during the pandemic boom.
However, in the 2022 technology inventory bare market, Adien’s profit margins have begun to fall. This was not because of the pandemic’s growth that was pivoted, but because of the opposite nature of adien management with employment. When all other software companies were doing employment freezes or layoffs, Adyen expanded its employee count to prepare for a global expansion. This has temporarily brought Adyen’s EBITDA margin, but it is already beginning to recover. EBITDA margin rose to 46% in the first half of 2024 compared to the first half of 2023.
Advance investments in the bear market will help Adien gain market share from the competition and should do so in the future. It processes $1 trillion in payments each year, which may seem like a huge number, but Adyen is still a digital payment pip. There is a big market for Adieen to chase, and it is set beautifully to take advantage of.
With Adyen’s business model, which acquires a small portion of all payments processed through the system, the company’s revenues increase with increasing payment volume. Management will lead to an annual revenue growth of at least 20% by 2026. We believe double-digit revenue growth will continue in 2026. This is because annual payments will reach $2 trillion, $3 trillion, and ultimately much higher. With more people around the world adopting digital payments, inflation helps raise the overall addressable market each year.
Over the past 12 months of reported financials, Adyen has generated more than $2 billion in revenue. I think there’s room for the company to double this revenue to $4 billion within a few years, and ultimately reaching $10 billion. With guidance on a 50% long-term EBITDA margin, Adyen could run a $5 billion EBITDA in the future. Compared to today’s market capitalization of around $50 billion, Adyen looks like a durable growth stock trade.
It looks as good as buying Adyen stock just before reporting its fourth quarter earnings on February 13th. Buy this stock and keep it for the long term.
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Brett Schafer There is a position in Spotify technology. Motley Fool has jobs and recommends Adyen, Spotify Technology, and Uber Technologies. To Motley’s fool Disclosure Policy.
