Berenberg initiates coverage on Wise at 'buy'

Wise facilitates "fast, cheap, and convenient" cross-border payment services for consumers and businesses. Rapidly taking share in a "large, growing market", Berenberg said Wise’s "superior economic model" and sharing of scale economies with customers were now "entrenching its competitive advantages".

The German bank also pointed out that ancillary income, such as the net interest income generated on customer balances, provided additional upside to consensus estimates.

Furthermore, Berenberg noted that its expensed infrastructure build-out was concealing "significantly higher underlying profitability" and/or a "meaningfully improved ability" to lower prices.

"High growth, high ROIC, cash-rich businesses that expense their investment and share economics with customers rarely look overtly cheap by point-in-time metrics; Wise trades on 30.9x FY24 EPS and 4.1% FCF yield (after expensing share-based payments)," said Berenberg. "Even at this rating, we see substantial upside, valuing Wise on a blend of target multiples and a DCF."

Reporting by Iain Gilbert at Sharecast.com