Wise Share Forecast January 2022 – Time to Buy WISE?
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Shares of London-based financial technology company Wise (LSE: WISE) are in the red today, after closing at £606.4 as of January 10th (17:51 GMT). Wise has a market share which is less than 1% of the £5 trillion a day global foreign exchange market. The tech company went public earlier in 2021 and surged in value initially. However, the shares have since seen a consistent downtrend, especially in recent months, in spite of there being demand for its services during the pandemic months.
Wise- Technical Analysis
According to the financial statement released by Wise, the market cap of the company is £6.213 billion with total assets worth £5.652 billion. Revenue for 2020 was at £421 million with a profit margin of 7.34% compared to £302.60 million in 2019.
Oscillators such as Relative Strength Index (14)(22.3), Stochastic %K (14, 3, 3)(8.7), Commodity Channel Index (20)(−377.9), Average Directional Index (14)(15.7) and Awesome Oscillator(−38.2) are neutral. Moving averages such as Exponential Moving Average (10)(707.4), Simple Moving Average (10)(723.7) Exponential Moving Average (20)(729.1), Simple Moving Average (20)(737.9) and Exponential Moving Average (30)(744.8) are indicating a sell action.
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Recent Developments
Wise plc facilitates currency exchanges and money transfers in near real-time. The company has increased revenue year on year whilst keeping profit margins small. Wise served 3.9m customers in the third quarter, an increase of 23% year-on-year as indicated in its report for the six months to the end of September. Wise’s appeal to customers was evident from the 44% increase in overall payment volume year-on-year.
Wise appointed Goldman Sachs and Morgan Stanley as joint global coordinators for its planned initial public offering. Initially known as TransferWise, it completed its rebranding with a new website domain on 22nd February 2021. The rebranding was made to showcase their expanded product offering beyond money transfer.
Wise’s cost of each transaction declined to 0.62% from 0.69%. The company’s management is planning to continue this strategy of reducing costs for consumers for as long as they can. It can still push costs lower as there is already a lot of free cash flow in the company. Free cash flow for Wise for the six months to the end of September came in at £59m, increasing 39% from the same period a year before. This will help Wise increase its marketing spend and reduce the cost of money transfers with consumers. More consumers will be attracted to the Wise platform if they implement lower costs and a wider marketing push.
Should You Buy WISE Shares?
Despite the company’s improving outlook, investors should take note of some of the risks as we move into 2022. Competition from stronger peers who can afford to undercut Wise on each transaction presents a real threat. As a result, profits can come under pressure, hitting the share price and forcing it to direct spending away from growth to maintain market share.
The Wise share price also reacts to news related to the currency transfer market. This was seen in October last year, the Wise share price fell a steep 8.5% on one day after three clearing houses said they were working with major European and US banks to make cross-border payments as fast as domestic equivalents.
Despite these risks, Wise is reaching an important stage in its growth history, presenting investors with an amazing opportunity to be a part of its expansion over the next several years. Considering this, you can add Wise shares to your portfolio for the long term.
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