Key Morningstar Metrics for Wise
- Fair Value Estimate: GBX 800
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of Wise’s Earnings
Wise WISE reported first-fiscal-half-year results with underlying profits growing 13% and administrative expenses growing 27%. Customer and volume growth were good, expanding 18% and 24%, respectively.
Why it matters: Wise has been expanding its direct connections into local payment systems, improving payout times, which ultimately drives customer and volume growth. It now settles 74% of payments instantly, up from 63% last year.
- Business volume growth of 24% stood out positively, showing growth acceleration and outpacing business customer growth of 17%. Platform volumes constituted about 5% of total volumes, a segment we think to become a core pillar of growth going forward.
- Expenses increased 27% primarily as a result of increased hiring. Wise expects full-year expenses to be around GBP 1 billion. The investments go into scaling the business and servicing its increasing customer base.
The bottom line: We raise our fair value estimate to GBX 800 from GBX 750 previously after updating our model with the good performance in business volumes year to date. Shares remain overvalued, in our view.
- We anticipate Wise to scale its business further and are optimistic about its platform opportunities. That said, Wise is passing on a significant portion of the efficiencies it generates with scale to its customers, thereby dampening an otherwise immensely positive operating leverage effect.
