Adyen Shares Surge on Positive Long-Range Outlook

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Shares of payment processing firm Adyen soared on Thursday as the company revealed a surprisingly positive long-range outlook. Despite still being below previous levels after a downbeat first-half report, Adyen’s stock jumped by 33%. In its latest update ahead of an investor presentation, the company announced that its revenue had increased by 22% in the third quarter, with processed volumes rising by 21%.

The growth rate mirrors the company’s performance in the first half, during which revenue rose by 21% alongside 23% growth in processed volumes. Adyen had previously cautioned about the profit-focused approach of digital businesses in North America, as well as struggles with talent acquisition.

In the third quarter alone, Adyen hired 175 new full-time employees, and the company plans to hire a similar number in the fourth quarter. However, there will be a scaling back of hiring next year. This strategic move to reduce expansion should help improve margins, as highlighted by analysts at Stifel. In the first half, Adyen hired a total of 550 people.

Furthermore, Adyen has set its sights on achieving annual revenue growth within the low to high 20% range until 2026. The company also aims to enhance its operating margins to over 50% by 2026.

Following the positive news, analysts at Wells Fargo upgraded Adyen from underweight to overweight in a double upgrade.

Previously, analysts expected Adyen to achieve approximately 20% revenue growth with EBITDA margins remaining below 50% for the foreseeable future due to pressure in the first half of 2023 and increased investments. However, with the new information provided by management regarding the path towards high-20% revenue growth through 2026 and the strength seen in the third quarter, analysts believe that Adyen is now well-positioned to succeed after diligently investing through a challenging period. This strategy has historically proven successful.

Adyen’s shares have experienced a 28% decline so far this year.

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