3 reasons I’m excited about Wise shares

The Wise plc (LON:WISE) share price has jumped since coming to the London market. Paul Summers likes what he sees. But is now the time to buy the shares?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Man smiling and working on laptop

Image source: Getty images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I think we can conclude that last week’s market debut from money transfer firm Wise (LSE: WISE) was a success. Despite wider market concerns about Covid-19 and inflation, shares breached the 1,000p mark on Friday — that’s already 20% up on its opening price of 800p.

So, is this a fintech flash in the pan? I don’t think so. Here’s why.

1. It’s profitable

One thing I like about Wise is that it’s actually making profits. In fact, it’s been doing so for the last four years. Last year, pre-tax profits doubled to £41m.

As a potential investor, this is important to me. At a time when many tech-related stocks are pushing frothy valuations despite being a long way from making real money, Wise is bucking the trend. Contrast this with tech peer Deliveroo. The takeaway delivery firm is reluctant to even forecast when it expects to make a profit.

Wise’s already-profitable business model could also provide some protection if global markets come off the boil. I’m not so sure Deliveroo offers the same protection.

2. No cash raise

The direct listing of Wise shares is another attraction. The first tech stock to do so on the London Stock Exchange, this means it’s not looking for a fresh injection of cash from investors. Instead, it’s merely selling existing shares on the market. There was no need for investment banks to underwrite this (and charge high fees for doing so). 

This move makes Wise similar to the US listing of music streaming service Spotify in 2018. Although operating in very different sectors, it’s worth noting that the latter’s share price is up over 70% since then. 

The fact that Wise isn’t raising cash also reminds me of a quote from star UK fund manager Terry Smith: “Call us old-fashioned but when we’ve bought shares in a company, we like them to send us money after that, not the other way around. We think that’s how this relationship should work.”

3. Huge growth potential

Fintech is all the rage right now and it’s not hard to see why.  Investment in this space hit $44bn last year.

Sure, there are risks. One that immediately jumps out at me is the threat of cybercriminal attacks. Ongoing regulation could also prove a headwind.

Nevertheless, let’s not overlook the fact that this is a huge market and Wise has the potential to continue disrupting a part of the economy which has hitherto been dominated by big banks and the likes of Western Union. According to the company, its customers already send £5bn across borders every month. 

So, will I be buying?

Not yet. Wise shares could climb higher but I’d be inclined to build a stake slowly. As Dr Martens has shown, traders can be quick to sell after the initial hype dies down. No share price rises in a straight line, regardless of its growth potential.

The high number of companies coming to market right now also make me wary. This is nothing against Wise specifically, but it does imply that many founders now think they’ll get an optimum price for their shares. This could indicate markets are peaking. There’s something to be said for zigging when the majority are zagging.

Over the long term, Wise shares could prove a very wise investment. For now, I’ll watch from the sidelines.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Spotify Technology. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

A once-in-a-decade chance to get rich buying growth stocks?

We haven't seen a good spell for growth stocks for quite a few years now. But I reckon the signs…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

The FTSE 100 is full of bargains! Here’s 1 stock I’m eyeing up

A weak economic outlook has hurt the FTSE 100. This Fool explains why she likes the look of this consumer…

Read more »

Investing Articles

2 no-brainer beginner FTSE 100 stocks to buy for my portfolio

Getting started with investing can be daunting. Here are two stocks for beginners to consider buying to build their first…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Glencore share price drops on results. Time to buy?

The Glencore share price wobbled a bit after a weak set of 2023 results. Here's why I have the stock…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Big trouble in China sinks HSBC shares. Should I invest after record FY results?

HSBC shares have slumped following a disappointing end to 2023 for the FTSE stock. Royston Wild explains why this may…

Read more »

View of Tower Bridge in Autumn
Investing Articles

3 dirt cheap FTSE 100 shares to snap up today?

The FTSE 100 is rallying, but many shares still look super cheap on fundamentals. Is our writer buying these three…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

FTSE 100 earnings: what can we expect from Rolls-Royce in 2024?

The Rolls-Royce share price tripled in 2023. Roland Head wonders whether this FTSE 100 stock could continue that impressive trajectory…

Read more »