Will H1 results boost Wise’s share price?

Wise’s second quarter trading update published in October saw the money transfer company up its full-year income guidance. The results showed growth in revenues and volumes, despite the company upping prices. Upcoming interim results will be a chance to dig deeper into the numbers.

Wise’s [WISE.L] share price plummeted in the first half of 2022 as part of a wider selloff in tech stocks. Yet, the second half of the year has proven better for the money transfer company’s stock price. Since hitting a year low of 285p on 30 June, Wise’s stock is now up over 110%, closing Friday 25 November at 625.6p. 

Helping sentiment has been the company’s continued revenue growth and profitability. However, Wise’s stock carries a pricey 78.13p forward price-to-earnings ratio. To justify that premium, this week’s interim results will need to show that the company’s growth is built on a rock solid foundation.

What’s happening with Wise’s share price

Wise’s London debut in July 2021 was seen as a win for the London’s ambitions to become a leading tech hub post-Brexit. The IPO was one of three big tech listings that year. Cyber security firm Darktrace [DARK.L] had listed at the end of April 2021 at a £1.7bn valuation, while online takeaway provider Deliveroo [ROO] raised £1.5bn in its listing earlier that month.

Since going public on 7 July, Wise’s share price has fallen 33.17% — a better performance than Deliveroo’s 69.4% fall, and on par with Darktrace’s 33% drop over the same period.

Wise’s share price has also shown some resilience despite some negative press. In August, Wise was fined $360,000 in Abu Dhabi over failures in its anti-money laundering controls. More bad news came in June, when the UK’s Financial Conduct Authority launched an investigation into CEO Kristo Käärmann over deliberately defaulting on tax payments.

Wise’s second quarter delivers growth

With Wise having already reported first and second quarterly trading updates, this week’s interim results will be a chance to dig deeper into a fuller set of numbers.

Wise reported a 59% year-on-year rise in revenues in the second quarter to £211.15m. Total volumes were up 50% year-on-year to £27bn. The rise in volume was driven by an increase in Wise Account and Wise Business customers. The number of personal customers rose 40% year-on-year to 5.2 million, up from 3.7 million in the same period last year. Business customers rose 31% year-on-year to around 300,000. 

Price increases lifted revenue in the second quarter. The price hike was caused by high levels of FX volatility which led to a rise in the cost to buy and sell currencies. Wise said that the volatility had led to the increase in average fees from 0.61% to 0.64%.

Wise made £17.5m of net interest income from money sitting in customer accounts during the second quarter.

For the full year, Wise upped its guidance to a 55-60% jump in total income, with expectations that growth will continue to be greater than 20% over the medium term. The payments company said it expected adjusted EBITDA marker to be at or over 20% over the medium term.

Interest income expected to grow

Total income, which comprises both revenues and net interest, is expected to be £416.1m for the first half of the year, a 63% year-on-year gain.

Any update on the outlook for Wise’s second half of the year, ending 31 March, will be closely watched. The company expects interest income to increase in the second half of the year as central banks continue to increase rates. Chief Financial Officer Matt Briers told analysts that account balances had “continued to grow” and more detail would be available in the interim results.

International growth plans will be keenly watched. In November the company announced it had secured a Capital Markets Services (CMS) licence from the Singapore regulator. This allows Wise to offer its investment products to customers in the country and follows the granting of a similar licence from the Estonian regulator. This followed the securing of a £300m debt facility from Silicon Valley Bank in order to help Wise with its growth plans.

Wise’s share price carries a 767p median 12 month price target from the nine analysts polled by Refinitiv. Hitting this would see a 22.6% upside on Friday’s close.

After this week’s interim results, the next key date for investors is the publication of Wise’s third quarter results on 17 January 2023.