Automation And Digital Trends Will Reshape Consumer Finance

Key Takeaways

• Strong loan demand, technological efficiencies, and an expanding product pipeline position Wisr for substantial growth in revenue, margins, and long-term profitability.
  
• Alignment with shifting consumer preferences and a large underpenetrated market enhance Wisr's competitiveness and potential for sustained user and revenue expansion.
  
• Limited profitability, heavy reliance on external funding, scaling risks, rising competition, and increased regulatory costs all threaten Wisr's earnings and long-term margin stability.

Catalysts

Engages in the lending business in Australia.

• Rapid acceleration in loan originations (101% YoY growth) and consecutive quarters of loan book expansion signal continued robust loan demand, supported by banks retreating from personal/auto lending. This is likely to significantly expand Wisr's future revenue base.
  
• Advancements in automation and proprietary credit decisioning (80% of loans now auto-approved and enhanced arrears management) are driving material cost efficiencies and lower loss rates (net losses down to 1.66%), which should translate into sustainably higher net margins and improved earnings as the business scales.
  
• Consumer preference is shifting towards digital-first, ethical, and transparent financial solutions, aligning with Wisr's wellness-oriented brand and tech platform, increasing potential for user retention and pricing power, supporting both topline revenue growth and margin improvement.
  
• Scaling operational model and technology investments provide operating leverage; as revenue grows faster than operating expenses, this should drive a step change in profitability (moving to sustained positive cash NPAT), strengthening long-term earnings outlook.
  
• Large, underpenetrated addressable market (A$58B TAM vs. $824M book) and ongoing product pipeline (potential new loan products and non-lending Wisr App services) offer material headroom for revenue and user base expansion over multiple years.

Wisr Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Wisr's revenue will grow by 98.2% annually over the next 3 years.
• Analysts are not forecasting that Wisr will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Wisr's profit margin will increase from -42.1% to the average AU Consumer Finance industry of 12.4% in 3 years.
• If Wisr's profit margin were to converge on the industry average, you could expect earnings to reach A$21.0 million (and earnings per share of A$0.01) by about August 2028, up from A$-9.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.5x on those 2028 earnings, up from -4.3x today. This future PE is lower than the current PE for the AU Consumer Finance industry at 13.7x.
• Analysts expect the number of shares outstanding to grow by 1.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.53%, as per the Simply Wall St company report.

Wisr Future Earnings Per Share Growth

Risks

• Persistent lack of profitability at the cash NPAT level, with current emphasis on future milestones rather than demonstrated sustained earnings, may limit Wisr's ability to reinvest in growth or withstand macroeconomic shocks, putting long-term net margins and overall earnings at risk.
  
• Wisr remains reliant on continual access to wholesale funding and warehouse facilities (such as the new $267m Barclays warehouse), leaving it exposed to tightening credit markets or rising interest rates, which could increase funding costs and compress net interest margins and revenue.
  
• Accelerating loan book growth after only recently returning to expansion, coupled with rapid origination increases, raises the risk that credit risk controls and arrears management platforms may not scale effectively, potentially leading to future increases in credit losses and negatively impacting net margins and earnings quality.
  
• Intensifying competition from other nonbanks and fintech lenders targeting the same customers-at the same time as incumbent banks are refocusing on other lending verticals-could put pressure on pricing power, reduce yield, and squeeze net margins as the industry matures.
  
• Heightened regulation around data privacy, responsible lending, and heightened scrutiny on fintech lenders could increase compliance costs and operational expenses, eroding profitability and negatively impacting bottom-line earnings in the long term.

Valuation

• The analysts have a consensus price target of A$0.088 for Wisr based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$0.11, and the most bearish reporting a price target of just A$0.07.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$169.9 million, earnings will come to A$21.0 million, and it would be trading on a PE ratio of 8.5x, assuming you use a discount rate of 11.5%.
  
• Given the current share price of A$0.03, the analyst price target of A$0.09 is 68.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.