Adyen share price is rebounding: Is it the best Dutch stock to buy?

Adyen (AMS: ADYEN) share price surged on Thursday as investors cheered the company’s balanced outlook. It rose by over 30%, in line with my previous forecast. Despite this comeback, Adyen remains about 70% below the highest point during the pandemic.

New normal for fintech

Fintech companies are facing a moment of reckoning as the growth they experienced in the last decade faded. Most companies like PayPal, Block, Shift4Payments, Toast, and Affirm saw record growth in the era of low interest rates.

As a result, these firms became multi-billion dollar companies. At its peak, PayPal saw its total market cap surge to over $300 billion. Similarly, Block, the parent company of Square was valued at over $120 billion. 

The same is true with Adyen, the Dutch payment company. This valuation was justified because of the company’s robust growth. For example, its annual revenue was €1.01 billion in 2017, €1.65 billion in 2018, €2.66 billion in 2019 and €6 billion in 2021.

This growth happened as companies from around the world embraced technology and digital payments. This included both large companies and small startups, which were heavily funded by venture capital companies. Today, Adyen counts companies like Uber, Bolt, and Virgin Hotels as customers.

Fintech companies growth exploded during the Covid-19 when most companies and customers embraced e-commerce. During the period, these firms saw growth that could have taken years to achieve.

Recently, however, business conditions have changed. While people are still shopping online, the volume of transactions has dropped to normal levels. Also, many companies already have a payment provider. Historically, companies tend to maintain their payment providers for a long time since changing can be expensive and time-consuming.

At the same time, the rising interest rates have led to weak consumer spending and lower fees for fintech companies. Further, Adyen is operating in a highly competitive industry that is also dominated by the likes of Stripe, PayPal, and Shift4 Payments.

Adyen stock price forecast

ADYEN chart by TradingView

Therefore, amid this turmoil, the question is whether it makes sense to invest in fintech companies like Adyen. In a statement this week, Adyen said that its third-quarter processed revenue jumped by 21% YoY to €243.1 million.

Its net revenue jumped by 22% to €413 million. Digital volumes tose by 21% while Unified Commerce revenue surged by 25%. These numbers mean that Adyen is still showing robust growth. Nonetheless, the management now believes that the company’s growth will slow down in the next few years. 

As a result, it lowered its guidance for the next three years calls for low- to high 20% range. Before that, its expectation was that its revenue would rise by between high- 20% and 30%. In a note, a Bloomberg analyst said:

Adyen, as expected, is not growing as fast as it used to do a few years ago. This is understandable since its growth was not expected to last forever. Therefore, I still believe that the company is a good investment as it becomes a value stock. 

The company has a solid customer base and more room to increase its revenue buy cross-selling. Therefore, there is a likelihood that the shares will continue rising in the long term. This new normal will entail slower growth and potentially higher profitability.

In the long term, I suspect that the Adyen share price will surge to the key resistance level at 1,150, the lowest swing in May 2022.