Wise Shares Slide as Profit Forecast Disappoints

Profits surge for the 2024 financial year, but investors are concerned about the lower forecasts for 2025

Alliance News 13 June, 2024 | 10:51AM
Facebook Twitter LinkedIn

neon pound symbols

Wise (WISE) slumped on Thursday after disappointing guidance took the shine off a year of financial progress and customer gains.

Key Morningstar Metrics for Wise

• Fair Value Estimate: £5.60
• Morningstar Rating: 2 stars
• Economic Moat: None
• Morningstar Uncertainty Rating: High

Shares in the currency transfer fintech plunged 15% to £7.14, pushing its market value to £7.3 billion. Wise floated at £8 per share in 2021, valuing the company around £8 billion.

In the financial year ended March 31, the company reported that revenue jumped 24% to £1.05 billion from £846.1 million a year earlier.

Pretax profit rose to £481.4 million, more than triple £146.5 million a year prior. Underlying pretax profit rose to £241.8 million from £74.3 million.

Looking ahead, Wise expects 15% to 20% annual underlying income growth for financial 2025.

Over the medium term, Wise expects to operate to an underlying pretax margin of 13% to 16%.

Investors Fret About 2025 Profit

Broker Jefferies said the 2025 guidance for underlying income was, at its mid-point, 2% below the consensus of £1.41 billion.

Worse, Jefferies said the underlying pretax margin guidance implies pretax profit of £175 to £225 million, 19% below the consensus of £247 million.

Wise said improvements in efficiency were gained in financial 2024 resulting in an inflated level of earnings, providing the opportunity to reduce average cross-border pricing by more than 2 basis points.

Adjusting for the "outperformance" in 2024 and price reduction in financial 2025, expected growth would have otherwise been 20% to 25%, Wise said.

In addition, Wise said it had initiated a second "re-price" in the first quarter of 2025, which will see price reductions for higher value transactions, particularly on main currency routes.

"While the announced guidance is disappointing at first glance given the price reduction, however, we think the cuts boost confidence in medium-term growth," Jefferies added.

In the financial year for 2024, Wise reported a 29% increase in active customers with growth across segments and regions.

This growth in customers drove a 13% increase in cross-border volumes to £118.5 billion, 16% growth on a constant currency basis, with double-digit growth across all five of geographical segments.

Active Personal customers grew 29% to 12.2 million, with Personal volumes growing by 14% to £87.2 billion.

 

TAGS

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Wise PLC Class A761.50 GBX0.59Rating

About Author

Alliance News  provides Morningstar with continuously updating coverage of news affecting listed companies.

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures