Payments star’s crash highlights investor myopia

The Adyen logo is seen at the reception desk of the company's headquarters in Amsterdam, Netherlands August 24, 2018. Picture taken August 24, 2018. REUTERS/Eva Plevier

LONDON, Aug 18 (Reuters Breakingviews) - European technology star Adyen’s (ADYEN.AS) share-price meltdown exposes investors’ short-termism. The 50 billion euro Dutch payments company on Thursday reported a 59% EBITDA margin for the first half of the year, below analysts’ expectations of over 60%. More hiring and rising staff travel costs are to blame. The bad news on profitability overshadowed a racy 37% year-on-year rise in revenue, to 609 million euros over the six-month period. Adyen’s shares dropped 12%.

The message is that investors are less interested in revenue growth, especially if it comes at the expense of near-term profits. Adyen’s perennially puffy valuation, of 51 times 2022 EBITDA even after Thursday’s fall, affords little room for error. That’s roughly double the multiple the market awards to sector peers like Visa (V.N), Mastercard (MA.N) and PayPal (PYPL.O). Still, Adyen might be right to expand at a time when the rest of the sector is retrenching. Hiring more engineers to build new products could help it diversify away from a historic reliance on tech giants like Uber Technologies (UBER.N) and Netflix (NFLX.O). Adyen has stuck to its long-term guidance of a 65% EBITDA margin, implying that the first-half dip is temporary. Profit-hungry investors risk losing sight of the long term. (By Karen Kwok)

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