Wise Plc (LSE: WISE) Game changer and a wise investment
This TabStocks Article takes an IN-DEPTH look at Wise Plc in 2022
Stock Name and Trading Stock Exchange Platform
Wise PLC – London Stock Exchange (LSE: WISE)
– OTC US (WPLCF: OTC US)
The Stock Sector
Wise is a financial technology company focused on payment processing solutions. It affords its clients inter-cross border payments and services.
The company is based in London, UK, and mainly operates across Europe but has additional operations throughout the world in Africa, Asia & Oceania.
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Wise was launched in 2011 to democratize money transfers across borders. It has had a strong impact on the lives of millions allowing the transfer of funds at a cheaper and more secure cost.
It was started by two friends from Estonia, namely, Taavet and Kristo who both worked in London. It has since grown to quite an established enterprise.
Recent Most Important News on Wise Plc
Wise shook headlines this week when it was announced as it was fined a hefty sum of $360000 by Abu Dhabi regulators for its leniency towards anti-money laundering.
Wise was accused of failing to identify and verify certain accounts held by high-risk customers. The penalty fee was reduced from an initial $450K following its cooperation.
The British Fintech has had an otherwise incredible month. Its share price saw a boost after it released earnings approaching the end of June.
The company penned a deal with Plaid last month that has allowed its 13M customers to connect to other fintech platforms like Venmo, Chime, Acorns, and many others.
The company beat all odds to achieve record performance this quarter. Its customer base saw an amazing rise of 37% over the year. It also recorded an increased volume of transactions.
CEO Kristo Karmann is under surveillance by UK financial regulators following suspicions of tax default.
This was negative news but the man promised to work with authorities to clear the issue. The roadmap ahead for the financial sector is very shaky with record-high inflation in its home country, the UK.
Current Position of Wise Plc
Finance has historically been a disputed zone, with disruption cycles experienced so often. The last century was particularly exciting as technology came into play and a new darling was born in the sector namely, FinTech.
Wise falls in this sector and seeks to deliver more efficiently and effectively than the conventional player.
Payment processing across borders was a rigorous feat, requiring multiple parties and a long period to complete.
Thanks to the many innovations, Wise has made this easier than before and at very rapid speeds it has enabled businesses to pay employees abroad, acquire goods, and manage accounting software.
Wise particularly stands out due to three main factors. Firstly, the company maintains a cheap fee and rate which makes it convenient for a wide range of customers.
It has also been careful in pricing its fees at the mid-price level to ensure that both parties benefit. Conventional banks usually charge extremely exorbitant.
Additionally, Wise is in liaison with many partners and thus offers its clients a variety of options for sending money. Wise facilitates money transfers in over 80 fairly huge countries.
Moreover, the speed of their transactions is fast, with 50% of their transactions being instant and the majority arriving in less than 24 hours.
Among its competitors, it has consistently ranked on top with a stellar performance in various metrics including product positioning, payment method, and exchange rate.
Its customer growth rate has been its holy grail that helped propel its performance forward in the last quarter. This was within the personal growth segment which saw an upsurge in users.
The atmosphere is tough, especially in the financial world. Change is taking place at the speed of light but perhaps the most lethal foe to traditional finance is the new buzzword, crypto.
Opinions run wild on where Fintech ends and crypto begins. The markets have taken a beating and nearly all indices are in the red for the past year.
The consensus is that technology is the future and those aligned in this direction in any sector will likely reap handsomely in the future.
The biggest threat to banking at the moment lies in the launch of the CBDC (Central bank digital currency) which can eliminate intermediaries.
The most affected party will likely be traditional finance which has no leverage in tech products. Wise and other fintech platforms are positioned to usher in this new era of money.
The company houses the crème de la crème of venture Capital funding its operations. This includes legendary investors like Peter Thiel, Sir Richard Branson, Anderson Horowitz & more.
Wise Plc WISE Stock Price Chart
The company is on a surge in the past month. It was not immune to the market decline in the first half of the year, plummeting by a margin during the period.
At the time of this writing, it closed the week at £479.5 on the 2nd of September 2022. Wise is now down by 45% from its IPO price in 2011.
It is now trading at a day range of 472p-485p. It reached a yearly high of GBX 1176 and reached a low of GBX. The average volume of shares is now at 1.88M.
The company is fairly valued at the moment and the share price is justified. With a market capitalization of £4.91B, it is in the mid-cap level.
Sentiment on Wise Plc
With the crypto market crash, people will once again turn to fiat currency and this will hugely benefit traditional finance. This could technically explain the increase in the company’s clients.
Many believe that its activities will increase more as a secure alternative to transfer and store funds.
The bold new cashless world will prompt individuals to use fintech platforms to transfer cash for a wide range of activities ranging from travel and work-related purposes.
Billionaire Peter Thiel has a huge stake in the company via Valar Ventures and states that:
Wise demonstrates true innovation in banking by enabling its users to retain their wealth across borders, instead of paying big fees to big banks.
Pros of Wise Plc based on Investors Outlook
- Solid returns – The company is generating positive results despite economic shocks and looks to withstand any black swan event.
- Strong foundations – The company founders are well-experienced having formerly worked in tech companies like Skype, with Mr. Taavet being its first employee. They also own a considerable stake in the company showing their commitment to its future growth.
- Massive growth – The company is on a growth spree, estimated to be increasing at 40% a year. Its financials are also up by the same measure.
- Firm Expansion – It is in the growth phase and has prioritized growth over gains. It can expand compared with other platforms to the big platforms which are at saturation.
Cons of Wise Plc based on Investors Outlook
- Stiff competition – The space is heavily contended by both legacy and new players like Payoneer, PayPal, MoneyGram, and more. Wise needs a moat to distinguish itself in the market.
- Regulation pressures – This goes without saying and was recently witnessed in the UAE where the company was fined for leniency. As they tap into new markets, they have to adapt to different laws that might be constraining.
Profits for Wise Plc
It has done well for itself and its shareholders, even as the world faces a myriad of catastrophes that impede growth. Growth stock felt the heat rather strongly, but Wise has stood its ground.
Revenue for their last quarter came in at £151.80M, rising by +32% YOY. Operating expenses went up by +38%, recorded at £78.35M.
The net income was up amazingly by 23% posted at £10.10M. The net profit margin was 6.6% for the quarter slightly decreasing by -6%.
EBITDA was recorded at £22.05M, increasing by +18.87% over the year. The balance sheet is also very neat, with its total assets valued at £7.56B.
Cash and short-term investments also went up by a solid +25%, estimated a £357.8M. It has a good amount of free cash flow currently at £24.50M and is expected to continue rising.
They are incrementing their fees although at an affordable rate and way cheaper than banks. This is in light of rising inflation which has elicited companies to follow suit.
Within three months ending on 30th June 2022, its transaction volume increased by 50% YOY in the second quarter.
Although the company holds very huge debt totaling £7B, it leverages this for its growth efforts and this is mostly long-term with a fixed rate.
The overall position and performance of the company are Superb, with a prospective outlook.
Pros of Investing in Wise Plc based on the General Outlook
- Excellent model – The company’s strategy of cutting its fees is very beneficial to its client and is typical of an efficient enterprise that leverages technology optimally.
- Exceptional Management – Both of its founders have a tech background and serve as Chairman and CEO. This reinforces faith by its holders as they have the assurance that they will work to advance the goals of the company.
- Future-oriented – Wise is believed to be the future of banking as more people opt for alternative better and cheaper ways to move money throughout the globe.
- Fast Operations – As a growing enterprise, it understands that speed is the single most important factor that differentiates it from both big and small players in the space. It acts swiftly in execution and this was reflected in increased volume.
Cons of Investing in Wise Plc based on the General Outlook
- Market Visibility – With so many options in the market, it faces an uphill battle to become a household name like PayPal and other legacy platforms.
- Cryptocurrencies – The mass adoption of Crypto for everyday transactions is still a risk to both conventional banks and growing fintech platforms.
Growth Likelihood and Potential of Wise Plc
The sector has experienced massive share depreciation as the broader market has sold out of high-growth tech stocks opting for less volatile alternatives.
Wise has three operating segments namely, Wise Transfer, Wise Business, and Wise platform. While legacy players have taken a hit, with PayPal losing as much as 70% in the past year.
Wise has been well hedged and with a sound value therefore did not lose as much value.
It is still down but showing signs of shooting back up. Most platforms have been losing customers but it managed to do the impossible in such unprecedented times.
The company is well connected and backed by powerful institutions. It has been continuously improving its technology with better algorithms to improve its network.
The true nature of the markets is revealed under stress and this has shown that legacy fintech platforms might be overvalued.
Wise was profitable way before it went public and is now trading cheap below its IPO levels, even though it has grown astoundingly since then.
It is thus very fairly valued and resonates with both individuals and businesses. It is therefore a fantastic opportunity in the long run and a solid growth company.
Wise has the faith of the legacy PayPal Co-founder together with many other serial entrepreneurs. The company is racing to capture market share but is well ahead of its peers.
This is a contrarian option that is a raging underdog in the fintech sector.
Overall Verdict on Wise Plc
The stock is of a fairly sound value and analysts rank the stock as a buy. The UK markets are wonky at the moment but it is a better option in the coming years and it’s appropriately priced.
Moving averages and oscillators indicate a neutral signal, further showcasing that the stock is just at the right price.
Its value is however much more than the current price and it will likely be a winner in the coming decade. Growth stock will rebound after the market cools down and the imminent crash passes.
An entry at the moment will protect one’s interest against a severe market collapse, but the stock will be even more attractive after a market.
The future of fintech is more secure than ever with rapid developments ongoing. The ease of use and preference will ensure the sector thrives in the coming years.
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