Interest Income And Platform Expansion Will Support A Stronger Long Term Earnings Profile

Catalysts

About Wise Group

Wise Group runs a global payments and money management platform for individuals, small businesses and financial institutions.

What are the underlying business or industry changes driving this perspective?

• Growing use of Wise Accounts, Wise cards and Wise Assets by 19 million active customers, together with a larger share of non cross border revenue, increases the scope for broader fee based income and can support net revenue and earnings.
• Expansion of Wise Platform with new partners such as Raiffeisen, UniCredit, MBSB and Capitec, along with a sizeable pipeline of banks in regions such as the U.S., can add higher volume channels that scale transaction revenue and spread fixed costs to protect margins.
• Direct connections into domestic payment systems in Japan and Brazil plus a broader global network, combined with AI driven servicing that already resolves half of support chats automatically, can lower unit costs and create room for both lower pricing and healthier income before tax margins.
• Customer balances of US$39b, including US$9b held through Wise Assets, together with an interest income framework that targets sharing 80% of yield above 1% with customers, create a recurring income stream that can support net revenue while still allowing for margin discipline.
• Increased marketing spend, larger sales teams for Wise Business and Platform and ongoing global license expansion in markets such as South Africa, the UAE and Thailand can widen Wise Group’s addressable base and sustain transaction and interest income growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Wise Group's revenue will grow by 18.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 19.9% today to 18.7% in 3 years time.
• Analysts expect earnings to reach $775.2 million (and earnings per share of $0.83) by about September 2029, up from $498.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $908.7 million in earnings, and the most bearish expecting $656.3 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 22.6x on those 2029 earnings, down from 26.2x today. This future PE is greater than the current PE for the US Diversified Financial industry at 17.3x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.79%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Wise Group is deliberately cutting prices over time, with the average take rate on cross border transfers moving from 58 basis points in FY 2025 to 52 basis points in FY 2026 and an indicated plan to trim a further 1 to 2 basis points each quarter in FY 2027. This could outpace efficiency gains in direct connections and AI, compress the take rate and weigh on net revenue and income before tax margins.
• The business is leaning heavily on interest income from customer balances, which was US$806 million in FY 2026 compared with US$1.9b of transaction revenue, while management guidance assumes no material changes to central bank rates. Any prolonged period of lower rates or tighter regulation on how interest can be shared with customers, especially in the U.K. where Wise Group currently cannot pay interest on most balances, could lower interest income and reduce overall earnings.
• Operating expenses are rising quickly to support long term growth, with total operating expenses at US$1.9b in FY 2026, marketing spend up more than 60% to US$172 million, servicing spend up 38% to US$397 million and tech and development spend up 38% to US$434 million. If customer acquisition or engagement slows, this higher fixed and semi fixed cost base could press on margins and earnings.
• Wise Group depends on regulatory approvals and a growing global license footprint, including new licenses in South Africa, the UAE and Thailand and an application for a non depository trust charter in the U.S. Any delay, restriction or adverse finding, including from ongoing legal or compliance inquiries such as the money laundering allegations mentioned on the call, could limit product rollouts, restrict interest sharing frameworks and affect both revenue growth and profitability.
• The long term thesis relies on capturing a much larger share of a US$43t cross border payments market from a current position of around 5% of individual volumes and less than 1% of SME volumes. Wise Platform still represents only about 5% of cross border volume and ramps slowly with new banks, so if partner onboarding, corridor expansion or competitive responses from banks and fintechs remain slower than planned, the expected operating leverage from scale may not materialize and could cap revenue and income before tax margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $16.94 for Wise Group based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $19.5, and the most bearish reporting a price target of just $13.3.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $4.1 billion, earnings will come to $775.2 million, and it would be trading on a PE ratio of 22.6x, assuming you use a discount rate of 7.8%.
• Given the current share price of $12.78, the analyst price target of $16.94 is 24.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.