James Gard: Morningstar has just initiated coverage on Wise, formerly known as Transferwise. The company started life as a disruptor, offering a low-cost money transfer service in different currencies. And it’s now an established fintech company, talked of in the same breath as Monzo, Starling or Revolut. It’s got a market cap of nearly eight billion pounds and has just told investors it has 6.7 million customers, who hold £11.5 billion pounds in its accounts.
Financial firms have benefited from the era of high and rising interest rates and Wise is no exception. With a steep rise in profits and revenue in the full year, the market has caught up with this growth story and shares are 35% higher than at the start of this year. At £7.50, they’re still below the IPO price of £8.
What does Morningstar think it’s worth? In starting coverage of Wise, anlayst Niklas Kammer assigns the firm a fair value of £5.20, that’s 30% below the current market price. He says that Wise doesn’t current have an economic moat yet. But this could change – Kammer says the company has a first-mover advantage and is building “scale”, a vital measure for tech firms. Recent growth has been driven by its low-cost model, he adds, and while “free” currency conversion is some way in the future, it remains an aspiration.
Wise has profited from its money transfer niche, but fintechs are naturally ambitious. To that end the app has started to offer some extras such as a low-cost investment tracker and payment cards. Our analyst thinks this should improve customer loyality and profitability but will open Wise up to competition from other banking disruptors offering similar services.
For Morningstar, I’m James Gard
