Wise PLC (LSE:WISE) has a “compelling and sticky customer proposition” and “outstanding” momentum, reckon Barclays PLC (LSE:BARC) analysts.
A bullish statement tempered by an admission that the cross-border payments disruptor’s net interest income money-printing machine will not last forever.
This is particularly true, if, as Wise has long pertained, it hopes to return these incredibly high profit margins back to customers one day, if the mean old British regulators allow it.
Liberum analysts, however, have made a good point.
Stripping away the profits generated from net interest income (NII), adjusted EBITDA margins have increased from 20% 25% "and prices (have) risen... for seven quarters in a row", according to analysts.
Correction: Note that, although average prices have indeed gone up, they have actually only increased over five of the past seven quarters, according to Wise's own data, and in fact went down in the first quarter of 2023.
These generous EBITDA margins are the result of materially lower administrative costs, “implying not all the benefit of lower costs is being passed on in prices”, according to Liberum.
But Liberum analysts still see Wise as an overvalued proposition, giving the group a 'sell' rating with a 615p target price against a 688.6p publication price.
According to Liberum, Alpha Group presents a very similar equity story at a better price, noting that, on an apples-to-apples basis (including interest income for Alpha Group and expensing share-based compensation costs for both), Wise is trading at four times Alpha’s EV/EBITDA and price-to-earnings ratios.
Proactive has approached Wise for a comment on Mission Zero.