Financial-technology stocks were falling early Wednesday. A warning from a major European payments company was sending jitters through the industry.
Worldline
(WLN.France), a major payments company based in France, slashed its full-year guidance on Wednesday as an economic slowdown hit sales and profitability in key markets.
Consumers are directing their spending toward essential items such as housing and food, rather than discretionary expenses such as entertainment or luxury goods, Worldline said.
Worldline shares fell 59% in Paris. The warning spread nerves throughout the payments and fintech industry. Shares of payments company
Block
(SQ) dropped 6.7%, and
PayPal Holdings
(PYPL) was down 4.4%.
Worldline focuses on business in Europe, and specifically called out Germany as a country where the macroeconomic environment was deteriorating. Worldline said it is now expecting 6% to 7% growth in organic sales for the year, after previously forecasting 8% to 10% growth this year.
PayPal generated around 18% of its revenue from Europe last year, while it accounted for just 3.3% of Block’s revenue, according to FactSet.
The warning from Worldline came as a contrast to relatively upbeat earnings from
Visa
(V), which was boosted by a continued postpandemic rebound in international travel. Visa shares were up 0.9% early on Wednesday.
Analysts at Mizuho Securities said worries for U.S. companies from Worldline’s warnings looked to be overblown, due to limited European exposure and the fact Visa hadn’t warned of recession in its own outlook.
However, shareholders have reason to be wary of PayPal and Square, which have fallen about 80% over the last two years. The stocks had been boosted by a surge in e-commerce spending during the Covid-19 pandemic. Square and PayPal now confront a tougher macroeconomic backdrop and both are undergoing management changes.
They also face stiffer competition from
Apple
(AAPL) and Google-parent
Alphabet
(GOOG), which are expanding their digital-payment services. MacRumors, a popular site for Apple news, reported on Tuesday that Apple appears to have now launched its buy now, pay later feature for all qualifying U.S. residents after previously limiting it to an invite-only policy. Buy now, pay later is a key growth area in the payments sector.
“Apple Pay is a potential explanation for why the market is structurally getting nervous about long-term growth and profitability of the payments industry,” said Peter Garnry, head of equity strategy at Saxo Bank, on Wednesday.
Other European payments companies were also hit hard on Wednesday. Dutch company
Adyen
(ADYEN.Netherlands) fell6.8% in Amsterdam and Italy’s
Nexi
(NEXI.Italy) dropped 14%.
Write to Adam Clark at [email protected]
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