French payments company Worldline’s shares plunged more than a half in value on Wednesday after it stunned investors with a cut to its full-year targets, spooking the stocks of rivals such as Nexi and CAB Payments.
Worldline said an economic slowdown had hit its business, particularly in Germany. It also severed ties with some of its merchants to reduce risks “in light of an increase in cybercrime”.
Following a boom during the Covid pandemic, when consumers flocked online and ditched cash, investors have grown increasingly cautious about the payments sector, with stretched valuations coming under pressure from higher interest rates and global funding of fintech deals dropping sharply.
Shares in Worldline, which failed to open at first on the Paris stock exchange because of excessive volatility, dropped as much as 60% to a record low of €9.31. The sell-off has wiped about $4bn off the company’s market value, according to Reuters calculations using LSEG data.
“While a macro slowdown was already incorporated in our recent estimates, the cut in the guidance (totally unexpected in this magnitude) and the issue on German merchants completely change WLN equity story,” Mediobanca Securities analysts said in a note to clients.
Worldline’s competitors came under pressure too, with Italy’s Nexi down 20.4%, the second biggest faller on the Stoxx 600 and set for its worst daily fall since March 2020.
Shares in CAB Payments shed 9.5%, having already plunged more than 70% on Tuesday after the London-listed company lowered its full-year revenue forecast.
Dutch payments firm Adyen’s shares were down more than 11% to a four-year low. The stock plunged over 50% in August when weak earnings stoked investor concerns.
The fallout spread to shares in US payments companies, which fell in pre-market trading. The likes of PayPal, Block, Upstart Holdings and Affirm Holdings fell between 2.1% and 7.1% ahead of the US open.
“It is a market that has been in a bubble,” said Jerome Legras, managing partner and head of research at Axiom Alternative Investments.
Challenges
Worldline CEO Gilles Grapinet said the economic downturn in Europe was reducing non-essential spending by shoppers, while increased regulatory scrutiny had forced it review its merchant risk policies. Cutting of ties with some merchants this year and next will cost it €130m in lost revenues.
“We face now more challenges than we anticipated even until very recently,” Grapinet told analysts.
Worldline said it now saw organic sales growth in 2023 of between 6% and 7%, compared with 8% to 10% previously. It also forecast a 150 basis point (bps) drop in its operating margin before depreciation and amortisation for 2023, compared with a previous forecast for a 100 bps increase.
“These results are a disappointment in terms of the full-year miss and also that long-term targets have been discarded,” JPMorgan analysts said.
JPMorgan strategists also said in a note that after Wednesday’s price move, Worldline was highly likely to be ejected from France’s CAC 40 in Euronext's next review of the benchmark index in December.
Recession fears are rising in the eurozone, with figures on Tuesday showing business activity taking a surprise turn for the worse this month as demand fell across the region.
Reuters
