What happened
The market was barely up this week as of 3:15 p.m. ET on Friday, despite getting thrashed on the week's final day. However, financial-technology (fintech) company Wex (WEX -0.30%) had fared far better, up around 13% compared to the market's 1% gain. And that has everything to do with gas prices.
So what
Earlier this week, OPEC decided to cut oil production by 2 million barrels a day, which had an immediate effect on prices. And as the chart below shows, Wex stock moved more closely in line with the price of oil than it did with the S&P 500:
Wex's fleet solutions segment generates much of its revenue by processing fuel transactions for corporate fleets. In the second quarter of 2022, Fleet Solutions accounted for 63% of Wex's total revenue. So gas prices are a big deal for the company.
In Wex's annual report, management said that every $0.01 change in the price of a gallon of gas can lead to a $1.5 million change in revenue. And according to AAA, OPEC's decision has already led to a $0.09 increase in the national average for a gallon of gas. In theory, this is good for Wex, and it's why the stock was up this week.
Now what
According to AAA, the national average for gas is $3.89 per gallon. One thing to keep in mind is that Wex guided for full-year revenue of $2.25 billion to $2.28 billion, which would be an increase of 43% from 2021. However, this guidance was based on management's assumption of $4.50-per-gallon gas in the third quarter.
Therefore, while it's good that gas prices are getting closer to management's assumptions, they've trended below expectations long enough that Wex could possibly fall short of revenue guidance when it reports Q3 results later this month. If that happens, the market could react negatively and push this fintech stock lower.
