Adyen (ADYE.Y -1.57%) is used by millions of consumers around the world every day but it is invisible to the everyday consumer. The financial technology giant processes around $1 trillion in payment volume annually, putting up impressive revenue growth over the last few years.

Its customers include Spotify and Netflix, large enterprises with complex payment needs, which rely on Adyen to seamlessly accept customer transactions around the globe. It is no surprise then to see tech investor Cathie Wood and her investment firm Ark Invest hold a sizable position in the company.

While Adyen used to be a stock market darling, investor sentiment has suddenly turned negative. Share prices are down 40% in recent weeks after the company reported slowing revenue growth and compressing profit margins in the first half of 2023. The stock price drop wiped out over $10 billion in market value.

Does this present a buying opportunity for long-term investors? Or is there more pain ahead for Adyen shareholders?

Slowing growth, deteriorating margins

Adyen is a payments processor with the goal of upending the clunky legacy systems used by many companies. It began by processing digital payments in Europe but has since expanded around the globe and added more capabilities, like its point-of-sale system. Essentially, its goal is to have ubiquitous capabilities for its merchant customers to process payments in whatever method their customers want, and in whatever country they are located. A tall task, and one that has taken many years to build from scratch.

These improved processing capabilities allowed Adyen to win customers from legacy solutions, growing from zero business at its founding in 2006 to just under $1 trillion processed over the last 12 months. However, with belt-tightening in IT departments and fears over an economic slowdown in executive suites, companies have been hesitant to switch over to modern payment solutions this year. This meant a slowdown in revenue growth at Adyen in the first half of 2023, with net sales up 21% year over year compared to 37% growth a year ago.

The company is seeing a double whammy when it comes to profit margins. With hiring slowdowns across various tech sectors, Adyen decided to zig and hire 551 employees in the first half of this year, which brought EBITDA (earnings before interest, taxes, depreciation, and amortization) margins down to 43%. This should only be a short-term blip, though, as management said it plans to slow down hiring once we move into 2024, with EBITDA margins moving toward its long-term goal of 65% thereafter.

The long-term growth opportunity remains in place

While Adyen may be facing some growth pressure in 2023, investors should note that the company is still growing annual revenue by 20%-plus and the company has a fantastic industry tailwind at its back. Digital payments are expected to grow at an 11.8% rate through 2027 and hit close to $15 trillion in annual volumes by then.

If Adyen can continue winning market share, it should be able to grow its revenue well north of industry levels for at least the next few years, if not longer. This should ease any investor concerns over this 2023 growth slowdown. Adyen may not grow its sales by 40% every year, but it can grow its revenue by 15%-20% for a long while.

Is now the time to buy shares? 

Today, Adyen has a market cap of $25.4 billion and did $742 million in EBITDA over the last 12 months. That gives the stock an earnings multiple based on its trailing EBITDA of 34.2. With its history of double-digit revenue growth, I think the stock looks like a buy for investors focused on the long term.

To be clear, this is still an expensive-looking earnings multiple that should keep investors cautious about buying the dip here. But it is much cheaper than in years prior when Adyen traded at 60 times or even close to 100 times its trailing EBITDA numbers.  

The next few quarters may be tough, but if Adyen can grow its revenue by 15%-20% a year and achieve its 65% EBITDA margin target, the stock will likely do just fine for shareholders this decade and beyond.