The Wise share price plunges 10% in 2 weeks! Here’s what I’d do now

Rupert Hargreaves explains why the Wise share price has tanked recently and why he thinks this is an opportunity for long-term investors like him.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

The Wise (LSE: WISE) share price has plunged a hefty 10% since 22 September. The stock then peaked at around 1,150p, but has since fallen back to around 1,037p.

Still, even after this performance, shares in the financial services business remain 30% above their IPO price of 800p. I think this presents an opportunity to snap up some shares in this growing business at a discounted valuation. 

Wise share price opportunity 

There seem to be a couple of reasons why its shares have been declining recently. The most high-profile reason is the revelation that the group’s CEO, Kristo Kaarmann, has been fined by HMRC for deliberately defaulting on his taxes

According to reports, Kaarmann was charged £365,651 after failing to file a tax return in a year when he owned £720,495. 

The Wise share price dropped on this news, and it’s continued to decline on speculation that the fine could lead to action against the founder from the Financial Conduct Authority (FCA).

The financial regulator has strict rules regarding the conduct of financial company directors, and getting into trouble with HMRC is a big red flag. As of yet, the regulator hasn’t taken any action. But that doesn’t mean it won’t happen in the future. 

This situation may have harmed the Wise share price, but it seems unlikely the underlying business will suffer as a result. That’s why I think there’s an opportunity for me here. 

Growth opportunity

As I have noted before, I think Wise is a revolutionary business with tremendous growth potential. The organisation currently processes just £54bn of transactions a year. That’s a tiny fraction of its largest peer, PayPal, with the US tech group processing £730bn of transactions in 2020 alone.

Having used both services, I think Wise comes out on top. It is far cheaper and easier to use. 

The company also has the financial resources available to grab market share from larger competitors. Last year, it generated £31m of profit after tax, which leaves plenty of money available for marketing and growth investment.

No figures are yet available for the company’s performance in 2021, but I think there is a good chance Wise has continued to expand. 

This is why I’d buy the stock today despite potential regulatory issues. If the FCA moves against Kaarmann, it’s unlikely the underlying product will change. That’s what consumers are buying. 

A more considerable risk will be if the company’s found to be ignoring any of the regulator’s other rules. In this situation, it could face significant sanctions. It could also face challenges from competitors such as PayPal if they decide Wise is becoming too big for its boots. However, at this point, there’s no indication this will happen. 

Even after taking these risks into account, I think the outlook for the Wise share price is only improving. As such, I’d buy the stock today. 

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.

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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »