This report is an updated version of the report published on 21 August 2024 at 12:00 PM AEST.

WiseTech Global Limited (ASX: WTC)  

WiseTech Global Limited (ASX: WTC) caters to the global logistics execution industry with software solutions. Its client list includes more than 17,000 of the world’s logistics companies across 174 countries. Its flagship technology is CargoWise for logistics service providers.

Recommendation Rationale – SELL at AUD 114.99

• Trading Around Resistance: WTC’s share price surpassed its R2 level recommended on 9 August 2024.
• Overvalued Multiples: On a forward 12-month basis, the stock is trading at an EV/EBITDA multiple of 52.9x vs industry (Technology) average of 16.6x.
• Rising Costs: The company noted increased operating expenses in FY24 (up 24% YoY) attributed to higher product design & development (P&D), general & administration, among others. In FY25, the company anticipates higher P&D costs due to continued investments in research and development, including increased hiring. These factors are expected to exert downward pressure on its margins in the future.
• Emerging Risks: As a technology company, WTC is vulnerable to cybersecurity risks, including data breaches or cyberattacks that could compromise client data and damage its reputation. The logistics software market is competitive, with numerous players offering similar solutions. Increased competition could pressure prices and margins.

WTC Daily Chart

Source: Trading View

Valuation Methodology: P/E Approach (FY June'25E) (Illustrative)

Given the higher targets for revenue and EBITDA for FY25, focus on continuous innovation and strategic acquisitions, the company’s global presence, high gross margins in FY24, etc., the stock might trade at some premium to its peers. For valuation, few peers like TechnologyOne Ltd (ASX: TNE), Xero Ltd (ASX: XRO), and Megaport Ltd (ASX: MP1) have been considered. Considering that the stock has surpassed its R2 level, share price movement, other risks associated with the business, and downside indicated by the valuation, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 114.99, at 10:15 AM, as of 21 August 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 21 August 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.