Riding e-commerce wave, Wirecard sees core profits growing sixfold by 2025

Wirecard, the fintech company that last month joined Germany's blue-chip index, said on Tuesday it expects core profits to grow sixfold by the middle of the next decade thanks to a boom in e-commerce and digital payments.

The company, founded in 1999, is the leading German player in a payments sector that is rapidly expanding as established banks struggle to shake off the legacy of the global financial crash a decade ago.

Earnings before interest, taxation, depreciation and amortization (EBITDA) are forecast to exceed 3.3 billion euros ($3.79 billion), according to a Vision 2025 strategy due to be presented at an investor day in London.

That view is conservative, CEO Markus Braun told Reuters. “All the figures that we are giving represent the bottom end of the range - I want to stress that,” Braun said in an interview ahead of the event.

The long-term outlook compares with EBITDA guidance for this year of between 530 and 560 million euros, which Wirecard confirmed along with its existing forecasts for 2020.

Shares rose 5 percent in Frankfurt to 173 euros, making Wirecard the biggest gainer on the DAX
Knut Woller, analyst at Baader Helvea, said the long-term outlook confirmed his view that an acceleration of internally generated profit growth in the first half of this year “was not a ‘one-hit wonder’”.

Woller has a ‘buy’ rating on the stock with a price target of 198 euros.

‘VOICE’ COMMERCE

The company recently ousted Commerzbank from the blue-chip index thanks to a rise of 87 percent in its shares this year. More broadly, the digital payments sector led by Paypal is in vogue with investors.

It has not always been such smooth progress for Wirecard, which for years struggled to shake off a sleazy image as a payments provider for online porn and gambling sites, and more recently came under attack from speculative short sellers that are under investigation by state prosecutors.

To maintain its momentum, the company said it would focus on an accelerated convergence of online, mobile and point-of-sale payments through new technologies that can enable so-called ‘omnichannel’ commerce combining online, mobile and bricks-and-mortar businesses.

Braun said he saw particular opportunities in value-added services, such as making it possible for merchants to offer loans or insurance to customers when they make purchases via their smartphones or in stores.

Data-driven analysis of consumers’ purchasing habits should also make it possible to make more targeted sales offers, increasing turnover both for merchants and Wirecard, he said.

Braun, whose 7 percent stake in the company is worth $1.7 billion, also said he saw ‘voice’ commerce using digital assistants such as Amazon.com’s Alexa as a promising new growth channel.

In 2025, Wirecard expects transaction volumes to increase to more than 710 billion euros, while revenues are expected to reach at least 10 billion euros.

By comparison, the company forecasts transaction volumes of at least 215 billion euros in 2020, revenues of more than 3 billion euros and an EBITDA margin of 30 to 35 percent.