European payments giants 📉📉📉
Worldline, Adyen...their stock price is down; justified?
Hi sharkies,
if you are into the stock market and finance you might have noticed that European payment companies stocks are not having the best time right now 💸💸💸
The most notable mentions are Worldline 🇫🇷 and Adyen 🇳🇱
Once fintech darlings and now they are losing market value…but are investors wrong?
(Please note that what you are going to read are just our opinions and it’s not a suggestion to buy Worldline and/or Adyen stocks)
Before we take a look at Worldline and Adyen…
And in case you are still not subscribed…
Worldline SA case
Worldline SA is a French financial services company that specializes in payment and transactional services. It is one of the largest payment processors in Europe and offers a wide range of services, including merchant services, card payment processing, online payments, and point-of-sale (POS) systems, as well as electronic ticketing and other digital services.
Interesting fact about Worldline 👇
Worldline was originally a subsidiary of Atos, which is a multinational information technology service and consulting company headquartered in France. Worldline was spun off as a separate company and went public with an IPO in 2014.
To understand Worldline stock’s overall performance, this is what you need to see 👇
Current Worldline stock price is lower than on its IPO day 😕 which in our opinion is not realistic, but markets have their own ways
YTD results 👇
and last 5 days 👇
So, what happened here?
Well, the big percentage wise drop happened on October 25h. This is what the FT article wrote about it:
Worldline plummeted nearly 60 per cent in Paris after the French payments group downgraded its sales outlook and said it was clamping down on fraud in the sector by cutting off some clients. Shares collapsed to €9.4 on Wednesday, giving the company a market capitalisation of €2.7bn. The warning sparked a rout in the payments sector, dragging down shares in European and US peers.
So, was this sales outlook downgrade a large one? Are the clients that Worldline is cutting off big ones?
Worldline cited a deteriorating economic backdrop especially in Germany, its biggest market, with shoppers cutting spending, as one of the reasons for cutting revenue forecast for 2023. It now predicts growth of 6 per cent to 7 per cent, from 8 per cent to 10 per cent previously. The group said it had also cut ties with some merchants as it enforced a stricter approach to cyber crime risks. That raised the spectre for the sector of a broader regulatory crackdown that could yield more pain.
So, it’s not that the Worldline will stop growing but the predicted growth will be a couple % lower, that is all.
Markets thought…why not “reward” this with a 60% stock price drop? 🤔
But on a more serious note, there are a couple of things you need to know to understand the whole picture…
Business Wave view
Worldline stock growth was fueled by 2 factors 👇
Overall Fintech market “crazy” where anything that has the word fintech in it is considered a great investment opportunity. Worldline is no different, but the whole business model actually has a point because they make money when you pay with your cards/e-wallets.
Covid-19 was a catalyst for fintech stocks because cash payments were a big “no-no”, and businesses that were feeling “very strongly” against cards now started to accept them.
So, is Worldline’s current stock price realistic?
Depends on your investment horizon. If you are looking at 10 years from now, it is not. However, if there is a recession in the near future, that will mean less spending which will affect the stock price for sure.
Adyen case
Adyen is a multinational payment company that provides businesses with a single solution to accept payments from anywhere in the world. Adyen's platform allows businesses to accept electronic payments through various methods including credit cards, bank-based payments such as direct debit, bank transfers, and real-time bank transfers, mobile wallets, and point-of-sale (POS) systems.
Adyen’s overall stock performance doesn’t look that bad 👇
YTD results 👇
When the things went “south” 👇
So, what happened here?
Well, they missed their🎯
Adyen reported 739.1 million euros ($804.3 million) revenue in H1 23, up 21% from 2022 but below the expected 40%. EBITDA is down 10% from H1 22.
After the news got out, the markets responded with more than 40% price drop because the company delivered only 21% revenue growth instead of 40%…
This all happened back in August, so you might be wondering “Why are we comparing Adyen to Worldline now?”
Because Adyen stock still hasn’t recovered, and that might give us insight into how markets will be treating not only Worldline stock but all the other European payment-type stocks…