WISEa.L-Fintech Upgrading Wise forecasts, finding the Adyen floor

Alastair.Nolan@morganstanley.comGiulia.Aurora.Miotto@morganstanley.comAdam.Wood@morganstanley.comMichael.Mwaitirwa@morganstanley.comMORGAN STANLEY & CO. INTERNATIONAL PLC+Alastair P NolanEQUITY ANALYST+44 20 7425-4620Giulia Aurora Miotto, CFAEQUITY ANALYST+44 20 7425-5344Adam WoodEQUITY ANALYST+44 20 7425-4450Michael T MwaitirwaRESEARCH ASSOCIATE+44 20 7677-2771Institutional Investor Europe Research Poll isnow open. We hope you have enjoyed ourresearch over the past year and appreciate yoursupport. Request your ballot here.Please see our most recent fintech deep dives here:Thematics: Tokenisation: Rumbling OnFintech: Cross-border payments: Framing the risk ofdisruptionEuropean Fintech: Neobanks: Exploring disruptivepotentialCryptocurrency: Decentralised Finance (DeFi): AnAlternative Financial System?European Fintech: BNPL: At a cross-roadsAnd our recurring Fintech Radar series, where wekeep up with weekly developments in the fintechspace:The Fintech RadarFintechFintech || Europe EuropeUpgrading Wise forecasts,finding the Adyen floorWe raise Wise adj. EBITDA by 7-8% to reflect higher rates,increasing our PT to 700p (stay Overweight). We assess thefloor for Adyen (Overweight). We also provide updatedthoughts on Neobanks and sustainability of BNPL businessmodels, a focus during recent US investor meetings.WHAT'SCHANGED Wise PLC (WISEa.L)From:To:Price Target570p700pWe had several meetings in the US, speaking with investors about EuropeanFintech. Payments valuations were front and centre of the discussion,particularly in relation to Adyen. Wise remains in focus, with investors assessingthe impact of higher rates. We also saw interest in the future of neobanks, andsustainability of BNPL business models.#1 Payments: Wise – upgrading forecasts and PT for higher rates; Adyen –what's the right multiple? Interest levels in cross-border payments continue torise, with Wise a key focus, given tailwinds from higher rates (c. £7bn as of FY22,up 84% y/y), higher FX volatility and the rebound in travel, which, combined,suggest upside risk to numbers. We update our forecasts for higher rates,resulting in a 7-8% uplift to FY23-25 adj. EBITDA, increasing our PT to 700p. Weremain Overweight and sit 3-12% ahead of the Street on adj. EBITDA. Adyenremains a focus for US investors, with conversations centring on where we seevaluation support, as well as risks to 2023 growth. We recently updated our2023 forecasts (here), adjusting for a weaker macro backdrop/higher inflation.Turning to valuation, Adyen troughed at €1150 in June. We see strong valuationsupport at or below this level. At €1150, Adyen trades on c. 32x CY24 P/E, or aPEG of 1x, a level we see as attractive for a structural winner, and we believethere is strong investor interest at these levels. We also note increased investorinterest in offline players, such as Equal-weight rated Nexi and Worldline, with agrowing appreciation for defensive qualities, given a partial hedge vs. inflation(supporting growth).#2