Summary: WATCH
Score: 18/20
MOS: 36%
Share Price: €1915
Sticker Price: €2935
Is Adyen stock a good buy?
I know the share price might be perceived as high but depending on your brokerage, Adyen is also available OTC (Over the Counter) on brokerage platforms for $46 (USD). If your broker offers OTC stocks or allows you to buy fractional shares, you may be able to buy this stock at a lower price.
Adyen is a Dutch payment company founded in 2006 in Amsterdam, Netherlands.
Adyen offers merchants online services for accepting electronic payments as well as bank-based payments including debit cards, bank transfers, and real-time bank transfers. One nice benefit of using Adyen is they don’t have fees outside the transaction fees. In other words, they don’t charge a setup fee, monthly fee, or PCI compliance fee. This makes working with Adyen highly attractive for small and large businesses.
They are considered a large competitor to Square but the major difference is Adyen has a larger global footprint. Square is currently available in the US, Canada, Japan, Australia, and the UK. Adyen is currently available in Belgium, France, Germany, Italy, The Netherlands, Russia, Spain, UK, Canada, US, Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, Thailand, The Philippines, Brazil, and Mexico.
Some of Adyen’s large corporate customers include Ebay, Uber, Tiffany & Co., LinkedIn, McDonald’s, Transferwise, Spotify, Pinterest, Etsy, Microsoft, Groupon, and Gap.
One valuable feature Adyen places a high emphasis on risk management. You can monitor fraudulent payments, review insights, and optimize risk procedures. Spotify has stated “We rely heavily on Adyen RevenueProtect to solve fraud for us. With Adyen’s risk management solution, we decreased chargebacks by 70%.”
Here are some fun milestones.
- In 2009 they signed their first global enterprise merchant, Groupon.
- In 2010 they started offering their risk management solutions.
- In 2012 they opened office locations in San Francisco, London, Paris, and Stockholm.
- In 2012 they also added POS (Point of Sale) to their services.
- In 2021 they obtained a US banking license.
- Today they have 1,700+ employees diversified around 100+ nationalities, in 24 offices around the globe
Here is what the news has to say.
This is an old article from 2018 but still relevant today. Vator.tv announced a major corporate deal where Ebay replaced PayPal with Adyen as its primary payment processor. This was a big win in the companies history. This article also talks about Adyen’s Interchange++ pricing model which provides merchants with complete transparency on interchange rates.
This article from Yahoo Finance states that Adyen is launching in the United Arab Emirates to further expand its global footprint.
This article from Yahoo Finance states that Adyen has enabled Planet, an environmental impact donation mechanism at checkout. How it works is for every $.50 contributed by a customer, Planet will remove 1kg of plastic waste from the natural environment.
Now let’s take a look at the 4 M’s.
MOS (Margin of Safety): Tykr shows this stock as Watch due to the MOS being less than 50%. What is most impressive is the Score of 18/20. This shows the overall financials are very strong.
Meaning: Payment processors are highly lucrative business models. A company like Adyen doesn’t have to sell an actual product or service directly to consumers. They make their money like other payment processors by charging transaction fees. The key factor to pay attention to is low friction. In other words, merchants and consumers aren’t going to push back on the transaction fees because they’re so small but when you have a large audience making these transactions, that’s where the big money is made. Adyen has global momentum and isn’t slowing down.
Moat: The “war on cash” is a global movement to move away from paper money. The big players to pay attention to are PayPal and Stripe. Although those two companies are large, the market opportunity is larger. There is room for Adyen, PayPal, and Stripe to continue to grow.
Management: Pieter Van Der Does is the co-founder and CEO of Adyen. Prior to Adyen he helped build Bibit, a global payment service provider until it was bought by Royal Bank of Scotland in 2004. He then served as Head of Sales and Account Management at Royal Bank of Scotland for two years before co-founding Adyen in 2006. Overall, Van Der Does has over 20 years of experience in payment processing and experience building and selling a large entity. He is a perfect fit to lead Adyen.
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
All numbers in EUR.
Revenue (Found on the Income Statement)
2017: €1B
2018: €1.6B
2019: €2.6B
2020: €3.6B
Revenue has incredible growth. Increasing by €1B/year the last three years.
Net Income (Found on the Income Statement)
2017: €71M
2018: €131M
2019: €204M
2020: €261M
Net Income has increased consistently.
EPS (Found on the Income Statement)
2017: 2.42
2018: 4.45
2019: 6.86
2020: 8.63
EPS has increased consistently.
Free Cash Flow (Found on the Cash Flow Statement)
2017: €189M
2018: €370M
2019: €509M
2020: €994M
Free Cash Flow has increased consistently.
Total Assets (Found on the Balance Sheet)
2017: €1.1B
2018: €1.8B
2019: €2.6B
2020: €4.1B
Total Assets have increased significantly in 2020.
Total Liabilities (Found on the Balance Sheet)
2017: €747B
2018: €1.2B
2019: €1.7B
2020: €2.9B
Total Liabilities have increased which is okay.
Total Debt (Found on the Balance Sheet)
2017: €0
2018: €0
2019: €61M
2020: €131M
Total Debt is increasing.
Total Equity (Found on the Balance Sheet)
2017: €389M
2018: €582M
2019: €868M
2020: €1.2B
Total Equity has increased substantially in 2020.
With a score of 18/20, the overall financials are very strong. Although the MOS is not greater than 50%, it’s still at a discount with some solid upside potential. With the meaning, we know payment processors will continue to remain in demand for the next 10 years. With the moat, we know Square and PayPal are the big players but the payment processing market has plenty of room for all top providers. With the management, Pieter Van Der Does has proven success in the payment processing space.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.