Shares of payment-processor Adyen NV extended their massive selloff Friday amid continued concerns about competitive dynamics in the U.S.
Adyen
ADYEY,
ADYEN,
on Thursday came up shy of volume and revenue expectations when it posted results for the first half of the year, with management flagging heightened competition, especially as customers focus more on their own bottom lines.
“We have seen increasing competitive pressure in North America, and that’s, to my view, related to a higher interest-rate environment, [as] more companies are looking at the bottom line, and that’s an environment in which they try to see if cheaper alternatives work,” Chief Executive Pieter van der Does said on the company’s earnings call Thursday.
Adyen’s U.S. shares shed 39% in Thursday’s session and were off nearly 3% more in Friday afternoon action.
See also: Adyen sees flurry of ratings moves after 39% price drop on Thursday
Taking into account price action before earnings, Adyen shares logged their sixth session in a row of declines, marking their longest losing streak since Sept. 1, 2022, according to Dow Jones Market Data. They’ve fallen more than 45% over that span to secure their worst six-day stretch on record.
The Dutch processor now ranks eighth in the Netherlands by market capitalization. It stood at fifth as of Wednesday, before the latest report, according to Dow Jones Market Data.
Mizuho analyst Dan Dolev saw van der Does’ comments on competition as “euphemisms for pricing pressure,” suggesting to him that rival PayPal Holdings Inc.’s
PYPL,
Braintree business is causing trouble for the Dutch processor.
“In our view, Braintree’s aggressive land-grab strategy proved successful amid [Adyen’s first-half] results,” he wrote. “It likely contributed to the sharp deceleration in Adyen’s North America revenue growth.”
In his view, PayPal “deserves more credit for consistent growth and share gains at Braintree.”
Braintree may be a sore point now for Adyen investors, but it’s a touchy subject for PayPal investors, too. PayPal appears to be gaining traction with Braintree, but the quicker growth of Braintree relative to PayPal’s branded checkout business has caused margin pressure.
Read: PayPal takes some steps forward, but here’s what’s holding the stock back
Whether competitive trends ease is another issue. PayPal just named a new chief executive, so “the outlook for the Braintree strategy is uncertain,” SVB MoffettNathanson analyst Lisa Ellis wrote Friday.
“On balance, we believe the competitive pressure from PayPal’s Braintree business is likely to begin moderating in 2024 (as PayPal is under intense pressure to improve the gross profits of the business),” she continued.
Don’t miss: Elliott reveals it dumped its PayPal stake last quarter
Bernstein’s Harshita Rawat, meanwhile, wrote that U.S. e-commerce pressure “is likely structural.”
“It is one of the most competitive acquiring markets globally with less need for sophistication, presence of 800-pound gorilla (Chase which enjoys attractive costs because of the issuing side) & likely new price aggressors such as Braintree,” she wrote, noting that “PayPal wants [total payment volume growth] & also has the button cost benefit.”
Adyen’s latest earnings “reflected somewhat of a trade-off between volumes and pricing” as the company showed an “unwillingness to compete aggressively on pricing” in North America, pressuring volumes but helping the company beat “for the first time in a while” on its take rate, or the amount of money it retains through the economics of payment processing.
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