LONDON/MILAN, Aug 17 (Reuters) – A near 40% slide in the shares of Dutch payments processor Adyen NV (ADYEN.AS) on Thursday unnerved investors as concerns over its valuation and a price war grew.

The Adyen share plunge “was because expectations were much higher. Analysts believed that Adyen would take significantly more share in this difficult market environment,” said Jefferies equity analyst Hannes Leitner.

“When something like this happens, where basically the multiple is at question, … this usually creates a couple of days of selling.”

According to Refinitiv Datastream, Adyen was at an enterprise value of 43 times its 12-month core earnings based on Thursday’s closing price and the latest earnings release. That compares with 12.7 times for French rival Worldline (WLN.PA) and 8.8 times for Italy’s Nexi (NEXII.MI).

Adyen reported earnings that missed expectations, a rare slip since it went public in 2018. Competition from North America, where rivals cut prices, slowed its revenue growth and hiring costs hit margins.

While that sparked the initial fall in its stock price, the selling gathered momentum as the session wore on, wiping 17.8 billion euros ($19.3 billion) off Adyen’s market capitalisation by the close, its biggest ever one-day share drop.

“Its valuation was frankly way above that of its competitors and that was okay as long as things were going well,” said Marco Simion, senior fund manager at Swiss asset manager ZEST SA, who does not own shares in Adyen.

“Today’s miss has shown cracks in its growth prospects. Was the share price reaction justified? Probably it was, given the high valuation premium relative to its competitors.”

One European equities trader, who asked not to be named, noted there were orders to sell Adyen shares at any price and referred to “apocalypse selling.” Nearly a million shares traded hands, the biggest daily trading volume since September 2020.

Nexi and Worldline shares were caught in the fallout but were more resilient, each dropping around 3.5% on Thursday.

Crowding data by Citigroup showed investor positioning in Adyen was light pre-results and a negative earnings surprise was expected. UBS had a similar view, saying many investors already expected a miss.

Investors were already getting cold feet about Adyen’s sector which has been buffeted by higher interest rates.

Total fintech funding in the EMEA region was $11 billion in the first half of the year, less than half the $27 billion seen in the second half of 2022, according to KPMG.

Privately held rival Stripe raised funds in March at a valuation nearly 50% lower than two years earlier.

Despite stretched valuations, analysts were bullish on Adyen. According to data from Refinitiv, 17 analysts rated Adyen “buy”, 12 “hold”, and 4 “sell” before the earnings announcement.

CEO Pieter van der Does remained confident. “We run at the lowest cost, so we could join the price fight, but we don’t think that’s the right strategy,” he said in a post-earnings call with analysts.

($1 = 0.9198 euros)

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