Worldline (EPA: WLN) share price is crawling back this week as investors buy the dip following last week’s crash. The stock was trading at €12.25 on Tuesday, higher than last week’s low of €9.15. In all, it remains 72% below its highest point this year and 85% below its all-time high, which it reached it 2021.
Worldline growth concerns remainPayment companies have become fallen angels as their growth momentum fades. I have covered the sad decline of companies like PayPal and Adyen here and here. Sadly, the situation seems to be moving from bad to worse.
Worldline, a member of the blue-chip CAC 40 index, has faced significant challenges as growth in Europe slows. Last week, the company’s stock plunged hard after the firm missed its revenue guidance and downgraded its forward guidance.
Worldline’s total revenue jumped by just 4.8% in Q3 to €1.18 billion. This growth was because of its merchant services, whose revenue jumped by 7.6% to €868 million. This increase was offse by financial services and mobility and e-transactionsal services, which dropped by 2.9% and 0.2%.
The management believes that its revenue growth will continue slowing down in the coming months. This slowdown is mostly because of Germany, its biggest market. The most recent data showed that the German economy continued contracting in the third quarter, meaning it is now in a recession.
In all, Worldline expects its revenue will grow by between 6% and 7%. It also sees ots free cash flow being between 30% and 35% of its Operating Margin Before Depreciation and Armotisation (OMDA).
Therefore, the question among investors is whether this is a good time to buy the Worldline stock. I believe that investors overreacted last week when they dumped the stock that deep. Also, as with other fintech companies, they are now evolving from growth to value.
As we saw with Adyen, it takes time for a stock to recover after such a big dip. Therefore, there is a likelihood that the shares will remain in this range for a while. It will only bounce back once there is enough clarity about the European economy and its business performance.
Worldline share price outlook
The weekly chart shows how deep the WLD stock price has crashed in the past two years. It has plunged from over €85 in 2021 to €12 today. It now remains below the important support at €14.91, the lowest point in 2014. The shares have remained below all moving averages.
Therefore, I believe that the recent rebound is part of a dead cat bounce. This is a situation where an asset bounces back after a strong dip. In most periods, it usually leads to more downside in the market.
Worldline shares will ultimately rebound in the long term as investors embrace the new normal. For now, however, it makes sense to just stay away and wait for a bullish pattern to form.
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