Wise Q1 trading statement points to strong revenue growth
- Published: 23rd July 2021, 12:56
Wise, the firm formerly known as TransferWise, had a strong second quarter as demand for its money transfer services rose. That helped push its total market capitalisation to more than $17 billion, making it the biggest money transfer company globally.
Wise went public earlier this month, in one of the best London listings in years. The firm went public through direct listing instead of a normal IPO. Its stock price has climbed by more than 20% since it went public. As a result, its market value has risen to more than $17 billion. In contrast, Western Union is valued at about $9.43 billion while MoneyGram is valued at less than $1 billion. Eur
Wise published its first-quarter results this week. The results showed that its volume of transactions rose by 54% in the first quarter of the year to more than 16.4 billion pounds. On the other hand, revenue rose by 43% in the quarter, which is a sign that the business is gaining momentum. Precisely, the firm’s total volume rose to 16.5 billion pounds while its revenue rose to 123 million pounds.
Another takeaway from the trading update was that the number of customers who transacted in the quarter rose to 3.7 million. The management said:
“We were pleased that in the first quarter of this financial year we were able to reduce pricing by 2bps to 0.67%, dropping prices for 19 currencies while also delivering 38% of all transfers instantly. Our financials in that period were in line with our expectations with revenues of £123.5m, representing a growth of 43% YoY compared to Q1 FY2021.”
These results and the valuation provide further evidence that Wise is a strong and fast-growing company. Still, its valuation seems stretched considering that firms like Western Union and MoneyGram generate millions in profits. In fact, Western Union’s net income in the first quarter was bigger than Wise total revenue.
Therefore, the valuation shows that investors are more concerned with growth other than fundamentals. The same can be said about other fast-growing fintech firms like AfterPay and Klarna.
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Crispus Nyaga is a full-time financial analyst and trader with more than 7 years in the industry. He has been fortunate to work for several fintech companies, mostly from Europe, Asia, and North America. His work is published in leading platforms like Seeking Alpha, Invezz, InvestingCube, Capital.com, and Marketwatch. Crispus operates from a private office in Nairobi.