Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)