On Thursday, Morgan Stanley (NYSE:MS) maintained its Overweight rating and a £10.70 price target on Wise plc (WISE:LN) (OTC: WPLCF), anticipating the company to release its fourth-quarter 2024 top-line metrics in an upcoming trading update. The firm projects Wise's total volume for the quarter to reach approximately £31.7 billion, marking an 18.7% year-over-year increase and slightly above the consensus estimate of £31.6 billion.
The expectation is for Wise to continue its robust growth in new customer acquisitions during the fourth quarter, with active customer numbers predicted to climb by 31% year-over-year to around 8 million. The volume growth is expected to be more pronounced among customers who send less than £10,000 per month, although this will also contribute to a downward trend in volume per customer, which is projected to decrease by 9.6% year-over-year in the fourth quarter.
Morgan Stanley's revenue take rate assumption for Wise remains in line with the consensus at 0.90%, leading to a total revenue forecast of approximately £285.5 million, which aligns closely with market expectations. However, the firm's interest income forecast is slightly higher at £95.5 million compared to the consensus of £94.2 million, resulting in a total income forecast of around £381 million, about 0.5% above the consensus.
Ahead of the fourth-quarter trading update, Morgan Stanley updated its model to reflect the latest foreign exchange rates and adjusted interest rate assumptions. Consequently, this led to a roughly 20 basis point reduction in the total volume and revenue forecasts for fiscal year 2024 and a decrease of about 1% to the forecasts for fiscal years 2025 to 2027. Nevertheless, higher interest rate assumptions based on Morgan Stanley economists' forecasts are expected to largely offset the impact on total income levels for fiscal years 2024 and 2025.
The revised gross margin forecast for the second half of 2024, now estimated at approximately 73.2% of total income, up from the previous forecast of around 71.3%, is due to anticipated higher pricing. This adjustment, along with the higher interest rate assumptions, has led to an increase in the firm's adjusted EBITDA forecast for fiscal year 2024 by about 5%. As a result, the adjusted diluted earnings per share (EPS) forecast for fiscal year 2024 has been raised by approximately 7% to 34.66p. Wise is not expected to provide an update on its fiscal year 2025 guidance until the full-year results are announced in June.
InvestingPro Insights
As Wise plc (OTC: WPLCF) approaches its fourth-quarter trading update, a look at the real-time data and InvestingPro Tips can provide additional context for investors. With a market capitalization of $12.38 billion USD, Wise is trading at a high earnings multiple with a P/E ratio of 42.79 as of the last twelve months leading up to Q2 2024. However, the PEG ratio stands at 0.17, suggesting that the company's earnings growth may justify its P/E ratio. Additionally, the company's Price/Book ratio is at a substantial 13.33, reflecting a premium that the market is willing to pay for its book value.
InvestingPro Tips indicate that Wise's net income is expected to grow this year and the company is trading at a low P/E ratio relative to near-term earnings growth, which could be appealing for growth-oriented investors. Moreover, Wise's valuation implies a strong free cash flow yield, a metric that many investors monitor closely as it can be a sign of a company's ability to generate cash and sustain growth.
For investors seeking more detailed analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/WPLCF. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights, including the company's profitability predictions and historical returns.
By incorporating these metrics and insights into their evaluation, investors can gain a more nuanced understanding of Wise's financial health and growth prospects as they anticipate the release of the company's fourth-quarter results.
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