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On Friday, JPMorgan reiterated its Overweight rating and EUR1,659.00 price target for Adyen NV (AS:ADYEN:NA) (OTC: ADYYF), a leading global payment company. The endorsement comes after an analysis of the company’s fourth-quarter performance and future prospects.
Sandeep Deshpande, an analyst at JPMorgan, noted that Adyen’s customers who have already reported their fourth-quarter revenues indicate the possibility of Adyen surpassing expectations for revenue growth in the quarter. This potential outperformance is attributed to the higher growth rates of these customers.
Looking ahead, Deshpande pointed out that Adyen is expected to show a low-single digit increase in employee headcount for the fiscal year 2024, which he forecasts at 2.9%. This is a significant deceleration from the average annual headcount growth of 36.2% observed from 2018 to 2023. The slower headcount growth is anticipated to lead to a more modest increase in operating costs, which in turn could boost earnings.
The historical correlation between headcount and operating costs at Adyen has been strong. Over the past five years, the 36.2% average annual increase in headcount was accompanied by a 41.1% average rise in operating costs. For the fiscal year 2025, if the company’s operating costs grow at approximately 5%, which is higher than the headcount growth but well below the current Bloomberg consensus expectations of an 18% year-over-year increase, Adyen could surpass current EBIT estimates for FY25 by 17%.
JPMorgan’s estimates for Adyen’s FY25 EBIT are 7.1% above consensus, driven by a combination of higher anticipated revenue, which is 1.8% above consensus, and lower projected costs, which are roughly 4% below consensus. These projections suggest that the company is well-positioned for profitable growth, benefiting from the efficient scaling of its operations.
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