Wirecard Issues Upbeat FY25 Outlook, Reaffirms FY20 View

Wirecard Issues Upbeat FY25 Outlook, Reaffirms FY20 View
October 10, 2018

 

Wirecard AG (WDI.XE), a world leader in processing online payment transactions, gained 9.57% yesterday to close at €182.10 after the company unveiled its targets for 2025 before the innovation day in London. The Germany-based fintech company, which got inducted into the blue-chip share index stated that it anticipates core profits to swell six times by 2025, mainly due to robust growth in e-commerce and digital payments.

 

Upbeat EBITDA & revenue outlook

Established in 1999, Wirecard employs 4,500 people, transacts in over 100 currencies, has 34,000 clients from various business sectors and connects to more than 200 international payment networks (card, banks and other payment solutions).

For several years Wirecard struggled to shrug its grubby image as a payments processor for online porn and gambling sites, and as of late got battered by speculative short sellers who are under scrutiny by state prosecutors. The firm recently booted out Commerzbank from the blue-chip DAX index, following an appreciation of 84% in its stock price this year.

The firm started swiftly growing as traditional banks struggled to gain the trust of people following the global financial crisis in 2008.

Based on the robust growth, Wirecard expects earnings before interest, tax, depreciation, and amortization, or EBITDA, of more than 3.3 billion euros ($3.79 billion) in 2025.

The firm also expects minimum revenues of EUR10 billion and transaction volume surpassing EUR710 billion in 2025. That infers a take rate of 1.4%, which is a minuscule rise from Wirecard’s prevailing forecast that transaction volumes will exceed 215 billion euros in 2020 on revenues of over 3 billion euros.

The company affirmed its EBITDA view for fiscal 2018, while providing the 2020 targets. In fiscal 2017, Wirecard had revenue of EUR1.49 billion and EBITDA of EUR412.6 million. According to the FY17 report, the firm processed transactions worth approximately EUR91 billion.

Wirecard has specified two vital approaches to achieve its FY25 objective: the union of point-of-sale (ePOS), online and mobile channels and “the constant value chain development and innovative data-led value-added services.”

CEO, Markus Braun, said that Wirecard’s end-to-end solutions enabled it to profit from the transformation from cash, which still represents 80% to 85% of transactions around the world – to digital payments.

Braun further said: “This convergence from the point of sale to the electronic point of sale will be a very large growth driver for us.”

To keep their momentum going, the company will concentrate on drawing together online, point-of-sale and mobile payments.

Braus also opined that a data-driven study of consumers’ shopping behavior should also enable targeted sales offers, boosting turnover both for merchants and Wirecard, he said.

He also considers ‘voice’ commerce utilizing digital assistants such as Amazon.com’s Alexa as a potential new development channel. In case of digital platforms, the margins widen on scaling. That is another positive aspect for the company.

Regarding the outlook, Braun said: “All the figures that we are giving represent the bottom end of the range – I want to stress that.”

He followed up on this statement with the following:  “Wirecard could perhaps double “its so-called take rate – or the cut it charges on transactions – over that period. But it would not have been professional to reflect that in the long-term forecast.”

Commenting on the outlook, UBS analysts saidWe think Wirecard used its usual conservatism (Vision 2020 saw four upgrades) and will be able to achieve higher margins as the business scales. We think the new set targets will be well perceived and support the valuation premium.”

Fundamentally, the stock is expected to remain bullish on the strong outlook.

Technically, the stock is consolidating at 175 levels as shown in the image below. As a result, we can expect another rally in the days to come.

wdi - technical analysis - 10th October 2018

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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