Many have argued that Adyen has been particularly hard hit because of PayPal’s lower growth target and the assumption that the two companies’ volume growth is converging. If the convergence is in fact the true underlying dynamic then Adyen’s expected EBITDA of €1.98bn in FY2025 is still potentially attracting a too high valuation with the enterprise value at €52.4bn which equals a forward EV/EBITDA multiple of 26.5x on FY2025 EBITDA expectations compared to 17.8x for Block (former Square) and 12.4x for PayPal. But the premium on Adyen shares is driven by the higher expected growth rate compared to PayPal, but if the volume growth is converging to PayPal’s then the valuation could slide even further. With €216bn in processed volume in the first half of 2021 up 67% y/y, we are leaning towards the case that Adyen will not see its volume converge to PayPal’s anytime soon.
Adyen reports Q4 earnings on 9 February and the volume growth and especially forward guidance on volume growth will be very important for investors. Adyen must also show that EBITDA margin can continue to expand. Long-term we remain positive on the payments industry which is experiencing rapid technological change and many new players such as Block and Adyen that will take market share over time from the established players in the industry.