Credit Suisse slashed its price target on payments firm Wise on Thursday as it argued that management will likely be strategic rather than driven by near-term share price performance.
The bank, which rates the shares at ‘neutral’, said it was factoring the miss on EBITDA margins in the full-year results last month. This is driven by CS’s view that a long-term management team will continue to re-invest in the business and the cost of growth is likely increasing meaning operating leverage is unlikely to be visible in the near to medium term.
In addition, it said the price target cut to 410p from 640p also reflects higher market discount rates. The reduction is split roughly equally between a lower EBITDA margin and higher discount rates, it said.
“Significant catalysts in the equity story have not yet presented, where we see some important elements as binary in nature reflected in the large range between our blue sky and grey sky scenarios.
“Hence we retain our neutral rating. To turn more constructive over share-price performance in the next 12 months, we want to see signs Wise Platform can change risk perceptions around terminal value, evidence of operating leverage emerging and stabilisation in market discount rates.”
