Could 2025 Be the Year of Wise?

Wise plc (LSE: WISE) is a prominent Fintech startup often referred to as Europe’s premier Financial Technology company. 

As of January 9, 2025, Wise is trading at approximately 1,119 GBX per share, marking an impressive 26.9% increase over the past year. But is this surge just the beginning? Let’s dive into why 2025 might just be the breakout year for Wise.

Wise’s stock has been on a remarkable journey. Just six months ago, the shares tumbled by up to 15% following CEO Kristo Kaarmann’s announcement of slower growth projections. Fast forward to today, and the stock has not only recovered but surged to new heights. On January 3, 2025, Wise hit a 52-week high of 1,112 GBX, signaling strong market confidence.

But what’s driving this resurgence? It’s a mix of solid financial performance, strategic partnerships, and an expanding global footprint (regulated in 13 jurisdictions to date). With revenue growth of 24% to £1.1 billion and underlying income up by 31% to £1.2 billion in 2024, Wise is showing that it can bounce back stronger even after facing setbacks.

Analysts are divided on Wise’s future. MarketBeat reports an average 12-month price target of 942.67 GBX, suggesting a potential downside of about 15.15%. This consensus is based on four analysts, with targets ranging from 660 GBX to 1,123 GBX, and a “Hold” rating dominating the outlook.

On the flip side, TradingView paints a slightly more optimistic picture with an average price target of 1,006.39 GBX based on 18 analysts, with estimates stretching from 770 GBX to 1,320 GBX. This divergence highlights the uncertainty surrounding Wise’s trajectory, making it crucial for investors to weigh both bullish and cautious perspectives.

Wise’s growth story is compelling. Its revenue could grow significantly, driven by a 29% year-over-year increase in active customers, now standing at 18+ million. These customers have facilitated £118.5 billion in cross-border transactions last year, which is more than supposedly any bank in the world!

Wise isn’t just resting on its laurels. The company has been proactive in enhancing its infrastructure and expanding its services. Recent achievements include:

●      Infrastructure Enhancements: Connecting to the Australian domestic payment system (NPP), increasing direct connections to five systems.

●      Japan as Target Market: Obtaining a tier 1 license in Japan, removing the ¥1 million transfer limit and opening doors to a larger market.

●      Partnerships: Collaborating with Swift, Morgan Stanley, and a network of global banks, including Allica Bank (UK) and GMO Aozora Net Bank (Japan), to enhance payment capabilities, ensure seamless integration, and provide efficient cross-border payment solutions for corporate clients.

●      Instant Payments: The instant payment is a unique capability offered only by the likes of PayPal. No other money transfer company offers that. Instant transfers now account for 62% of payments, reflecting significant improvements in transaction speed. 

●      Improved Pricing: Wise implemented a reduction in cross-border pricing by more than 2 basis points on average per corridor, making its services more competitive.

Despite its successes, Wise has encountered challenges. The dip in share price six months ago was a direct result of slower growth projections, which rattled investors. It also has fierce competition, in the form of Revolut which has just obtained a baking license (more on that below). Moreover, in November 2024, Wise was rebuked by a European watchdog over money laundering controls, highlighting areas needing improvement in compliance measures.

Revolut has recently obtained its banking license allowing it to do more for its clients. Most importantly, funds are safer with them now that they are a bank. It is generally also cheaper than Wise though pricing works quite differently (Revolut offers subscriptions whereas Wise is a flat fee based on volume). 

Otherwise, the functionality is quite similar as Wise has opened its Wise Interest program and allows you to invest in stocks as well.

Still, Revolut boasts 50m+ customers against Wise’s less than 20m customers, and twice as much volume in cross-border payments. It poses a serious competition to Wise

The broader market is riding a wave of optimism, often referred to as "Trumphoria," fueled by positive investor sentiment towards the incoming administration's policies. Technology is gaining from it big time, but less so in Europe. We feel market sentiment towards Wise would be neutral. 

Wise plc has demonstrated remarkable resilience and growth, driven by strategic initiatives and a robust financial performance. It has strong competition out there, a tough environment (regulatory and economic), and in general neobanks are failing en mass. 

Nevertheless, Wise is a solid, growing, company, which keeps on diversifying its offering, and this could be the year when investors realize that this is one of few highly profitable Finteches out there.