Investing.com -- Citi analysts named Adyen (AS:ADYEN) as their top pick for 2025 and added the stock to their European Focus List.
The company’s shares rose less than 1% in European trading Thursday.
Citi sees Adyen as a structural winner in online and unified commerce payments, anticipating the company to gain market share supported by price rationalization and a shift in customer priorities toward performance.
Citi's forecast is based on Adyen's best-in-class technology and payment performance, which is expected to drive its status as a structural share gainer. The bank’s analysis, backed by merchant surveys and expert calls, suggests that Adyen's volume stickiness will improve as its Unified Commerce and Platforms segment grows from approximately 40% to around 50% by 2026.
“This will also enable high operating leverage/margin improvement and cashflow generation,” analysts noted.
Looking ahead to 2025, Citi foresees an acceleration in Adyen's growth, driven by gains in wallet share from competitors like Braintree and Stripe, and a focus on performance by customers.
The firm also notes that Adyen's management has visibility on customer wallet share movements and new wins due to the typical sales cycle length. Despite expected noise around volume growth into the fourth quarter of 2024 and 2025, Citi remains confident in the robust trends excluding Cash App volumes and minimal impact on revenue and EBITDA.
Moreover, Adyen’s margin recovery is on track, analysts said. Hiring in the fourth quarter is expected to remain below the “couple of hundred” target due to a slower run-rate, and this, alongside seasonality and the annualization of lower hires in the first half of the year, “will support further margin uplift” in the second half.
The firm also projects that Adyen will exceed the 2026 guidance of 50% EBITDA margins by 2025.
In anticipation of the fourth quarter 2024 results scheduled for February 4, 2025, Citi has opened a positive catalyst watch on Adyen.
The firm's revenue forecasts for the quarter are slightly above consensus, bolstered by positive e-commerce spending data. Citi also expects a better Q4 exit take rate and reassuring growth guidance for 2025 to drive upgrades in the 2025-26 period.
“While we continue to forecast margins ahead of the 2026 guidance, we do not expect to see annual guidance on margins,” analysts wrote.
Citi raised its target price on Adyen shares to €2,000 from €1,750, citing the current valuation “as attractive with improving fundamentals and visibility, and support from falling yields.”