Consider buying the dip in European payments company Adyen (ADYEN.AS), as its recent 22% stock drop presents an attractive entry point for a highly profitable business. The speaker owns Adyen and believes its strong fundamentals are being overlooked by the market's short-term concerns. Conversely, avoid buying Shopify (SHOP) for now due to its extremely high valuation, and instead add it to a watch list for a better price. For a high-risk, high-reward trade, Fastly (FSLY) is a speculative play on the AI theme that recently surged over 70%. While the speaker holds a speculative trade in Fastly, investors should note its valuation is based on future potential rather than current financial guidance.

Shopify (SHOP)

• Strong Financial Performance: The company reported excellent recent earnings.
  • Full-year revenue growth was 30%, an acceleration from the previous year.
  • The most recent quarter's revenue was higher than the entire year of 2020.
  • Free cash flow margins reached a strong 19%.
• Expanding Customer Base: Shopify is successfully moving beyond its traditional base of small businesses and is now attracting major enterprise clients like Starbucks, Estee Lauder, Elf, and General Motors.
• Product Innovation: The company continues to build new tools, including its successful payment system, Shopify Pay.
• Valuation Concerns: Despite strong performance, the stock fell 13% after the earnings report, primarily due to its high valuation.
  • The company trades at over 100 times earnings and over 12 times sales with a market cap of $143 billion.
• Competitive Risks: There is some uncertainty around the future of "agentic commerce." While Shopify has partnered with Google, there is a competing initiative from OpenAI and Stripe.

Takeaways

• Shopify is a fundamentally strong company with impressive growth and expanding market share.
• The primary risk for investors is the stock's very high valuation, which prices in significant future growth. The speaker noted they "can't justify the valuation at this level."
• Investors might consider this a "watch list" stock, waiting for a more attractive price point before buying into this high-quality business.

Adyen (ADYEN.AS)

• Post-Earnings Stock Drop: The stock fell 22% following its earnings report.
• Investor Concerns:
  • The digital segment saw a 1% decline in processed volume, partly due to losing a large customer, Cash App.
  • Revenue growth was negatively impacted by currency fluctuations.
  • Announced hiring plans are expected to keep EBITDA (a measure of profitability) margins flat in the near term.
• Bullish Counterpoints:
  • The lost Cash App business was described as a "low margin customer."
  • Increased hiring suggests management is confident about future growth prospects.
  • The underlying business remains fundamentally strong, with revenue, take rate, and free cash flow all improving.
  • The company has "world-class" EBITDA margins of 53% and has generated over €1 billion in free cash flow over the last year.
• Speaker's Position: The speaker owns shares in Adyen and views the current enterprise value of roughly $24 billion as an "attractive starting point."

Takeaways

• The significant stock drop appears to be driven by short-term concerns that may overlook the company's strong long-term fundamentals.
• For investors with a longer time horizon, the post-earnings sell-off could represent a buying opportunity, as the business continues to be highly profitable and cash-generative.
• The combination of a lower valuation and strong underlying metrics makes Adyen an interesting prospect for value-oriented growth investors.

Fastly (FSLY)

• Exceptional Earnings Report: The company had what was described as the "best earnings of the week," causing the stock to surge 72%.
  • Revenue grew by 23%.
  • Gross margins increased by over 4 percentage points.
  • Remaining Performance Obligations (a measure of future revenue) jumped 55%.
  • Management declared an "inflection point" for the business.
• AI & Growth Drivers: Fastly's edge cloud platform is benefiting from its partnership with ByteDance and the overall increase in AI-related web traffic and workloads.
• Valuation Question: The company's forward guidance of 14% sales growth and $40-$50 million in free cash flow for the year may not fully justify the massive 72% stock price increase on its own.
• Future Potential: As a smaller company with a market cap around $2 billion (compared to its larger rival Cloudflare), investors may see it as the "next AI winner" with significant room for growth if the AI narrative continues.
• Speaker's Position: The speaker owns a "speculative trade" in Fastly, indicating a belief in the upside potential but also an acknowledgment of the risk.

Takeaways

• Fastly is a high-risk, high-reward investment tied directly to the growth of AI and edge computing.
• The recent stock surge is based more on future potential and its positioning as an "AI winner" than on its current financial guidance.
• This is a speculative play. Investors should be aware that the stock's performance is heavily tied to market sentiment around AI and its ability to execute on its growth story.