I honestly think if they ‘direct listed’ today they’d be valued at least £5bn based on the rising tide principle, then they’d move above £10bn if they announce a US license and rollout plans.
Could just be me talking my book but I don’t think Transferwise and Revolut should be worth 10 and 24 times more than Monzo
I do think these valuations are obscene and having witnessed the 2000 crash I’d say this is resembling the vertical incline that led to the crash. It’s monetary inflation… Loads of cash desperate to find hard assets at any price. Houses, land, commodities, and apparently fintechs.
24 times, no. It’s worth remembering that the other players listed above Monzo are available in many more markets too, which leaves them much more room for growth, which I imagine is what leads to those valuations being so high: future potential growth. Monzo right now has a much lower ceiling in that regard compared to the others.
Revolut being the most highly valued makes a lot of sense to me too. Their pace is incredibly quick and no one can keep up with them. Their platform as a result is incredibly varied compared to their competitors, which make them an option in other finance markets too, not just current account products.
In terms of order of valuation from highest to lowest, I think indicates survivability too.
Revolut is without doubt worth more than Monzo. They’re in more markets, they have more users, they’re growing faster, they have more features/products. Many of these factors I think make them far less likely to falter too, whereas Monzo still feel a bit risky to me from an investment standpoint. Revolut has fingers in many pies so to speak, pies they can monetise, use as an incentive to create that platform lock in feeling, so users will be more sticky.
If and when Revolut gets that banking licence, it’s going to be a very big deal, and very tempting for a holdout like me. They can replace every other banking app on my phone, and that’s a big selling point.
Obviously: based on historic financials Monzo wouldn’t be worth anything at all, let alone £1bn
I feel you are missing from your list the key factor to balance those things which is risk. The last annual report shows a whole lot of risk, hence the down valuation.
Ultimately, at some point the shares need to return a dividend at a good percentage, however far off that is - that’s the end basis of what gives them value. There’s still substantial risk that won’t happen with Monzo shares at 1bn, let alone 5bn.
the valuations aren’t directly affected by the revenues. they are primarily about what the growth potential looks like vs the risk. Whatever the current revenues of these companies, the valuations are still based on huge growth expectations.
The reason continued large losses have affected Monzos valuation is more that it increases the risks associated with backing the company. Declaring profitability would at least mitigate some of the risks, but just increasing revenues (while still making a loss) probably won’t help that much.
I think they are due a valuation bump though, because at last valuation the pandemic meant a huge amount of additional risk which doesn’t really exist now.
It’s high, sure. Although revolut have also positioned themselves for growth in several markets, so I guess the opportunity is seen as much bigger.
Monzo still bares the significant risk (valuation wise) of becoming a reasonably sized U.K. only bank instead of a global banking revolution. I think if they start to hit the US market hard and gain traction there that will completely flip the valuation though.
My (admittedly amateur) assessment is that Monzo is probably valued almost exclusively on its UK operations and potential profitability there. I suspect Revolut is valued globally, so has more of the upside baked in already.
Revolut seems to be doing an excellent job, with upside if they bag a UK banking licence. I suspect, though, that there’s more potential growth for Monzo if it were to expand internationally. I’ve said this many times before, but I think they’re really missing a trick in not copy/pasting the bank for Ireland. The longer they leave expansion, the more unlikely it’ll be.