Chief Investment Strategist
Summary: Payments stocks are under pressure today as Worldline shares plunge 57% as the company is downgrading its fiscal year organic revenue growth adding question marks to long-term expected growth rates in the industry. Equity analysts have been remarkably wrong on their views on the payments industry and one key threat in the industry might be Apple Pay.
First is was Adyen shocking the market in August with declining EBITDA and worse-than-expected outlook sending its shares down 39% on the day (they have since declined another 29%). Today, it was the French-based payment company Worldline that reported lower than previously indicated organic revenue growth for 2023 at 6-7% vs 8-10% blaming it on deteriorating macro environment in particular in Germany. Worldline shares are down 57% today taking down other payment stocks such as Adyen down 7%. Our payments equity theme basket is also among the worst performing baskets the past year down 6% vs the MSCI World Index up 14%. Our data also suggest retail investors are massively buying the dip here across many of these payment companies.
How can such a small downgrade move an entire industry this much? What are analysts missing? Earlier this month a leading investment bank said about Adyen that it is a great business. Since Adyen lost its trust with investors in August the stock price has declined and the company has kept quiet saying it will make a business update November 8, 2023 at their Investor Day 2023. What is taking so long? One thing is for sure, Adyen’s revenue growth target of +25% is dead with today’s news from Worldline, but the question is what is the new structural growth rate?
Observing this meltdown in payment stocks with very little concrete reflection among equity analysts one has to wonder what is really going on. One explanation is provided in a Barron’s article back in July saying that Apple Pay’s increasing popularity is a big problem for PayPal and thus maybe also the wider payments industry. Could it be that Apple Pay over time will take over the digital payment infrastructure. Recently Apple ventured into buy-now-pay-later and is constantly adding new features to their wallet and Apple Pay solution. The threat from Apple should be a key consideration for any investor before piling into these falling payment stocks.
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