Soon after the company went public earlier this year, I explained why I was planning to buy shares in the money transfer business Wise (LSE: WISE). However, since I wrote that article, the Wise share price has spiralled higher.
The stock went public at around 800p. Today, it’s changing hands for 1,000p, a jump of 25% in just a few short weeks.
I missed my chance to buy the stock at a lower price after it went public. But as the Wise share price continues to climb, is there still time for me to get involved?
Wise share price potential
When I first covered the money transfer business, I noted that the group has enormous potential. The global foreign exchange market is worth around £4.7trn a day. Currently, Wise processes £54bn of transactions a year.
Its most prominent competitor, PayPal, processed just under $1trn, or £730bn of transactions in 2020.
I think Wise can overtake PayPal in terms of transaction volume. It’s cheaper and easier to use the service, and that should draw customers to the product. And as the company’s transaction volume grows, the Wise share price should reflect this increased usage.
The group has the funding available to drive this growth. Last year, it generated £31m of profit after tax, up more than 100% year-on-year. It can use this money on marketing and developing new products as well as services. As more customers join the company, it’ll have more money to invest for growth, and the cycle should continue.
On that basis, I think the Wise share price still has tremendous potential.
Risks to growth
Having said all of the above, this market’s incredibly competitive. Wise is just one of many payment processors. And it’s still a small speck on the radar compared to PayPal.
This exposes the enterprise to significant risks. If a larger competitor decides to attack the group’s market share, it could easily do so.
What’s more, more companies are entering the sector, and as competition grows, Wise may have to spend more and more money retaining and attracting new customers. This could result in a growth slowdown or, in the worst-case scenario, a drop in transaction volumes.
I’ll be keeping an eye on these risks as we advance. However, I think the company’s low fees and user interface, as well as a first-mover advantage, give it an edge over competitors.
On that basis, I don’t think it’s too late for me to buy the stock. I believe the Wise share price has tremendous potential, and that’s why I’d buy the equity for my portfolio today.
As the company continues to invest in growth, I think it can grab a significant share of the global foreign exchange market over the next few years.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended PayPal Holdings. The Motley Fool UK has recommended the following options: long January 2022 $75 calls on PayPal Holdings. 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.