WiseTech Global Ltd (WTC)
Is it time to enter Wisetech ? Pro and Con ? "We continue to believe WTC is a world-class business, and we will consider averaging our position around the $90 area."
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Answer
Hi Simon,
We continue to believe WTC is a quality business that we intend to average but it’s felt “heavy” in recent weeks hence we’ve been pedantic on entry, that and the fact that we already own the stock and were looking to beef up an existing holding at attractive levels.
It’s not just WTC that’s been soft of late, over the last month the Tech Sector has slipped ~5% while the ASX200 has advanced +2.9%, and the Materials Sector ~8%. As we’ve discussed a few times in recent weeks, we’re witnessing plenty of stock/sector rotation at the moment with some of the tech names being used as funding vehicles after years of outperformance. However, WTC has been a standout in the “naughty corner”:
- In August, the stock dropped over 10% after FY25 revenue missed expectations and FY26 guidance flagged margin pressure from its ~$US2.1bn e2open acquisition.
- The stocks carrying integration risks of this major purchase into 2026, but we believe much of this is already priced into the stock.
e2open may be a major deal but WTC has history on its side, having bought 53 businesses since its IPO, with these acquisitions contributing ~30% of its average annual revenue growth. Two metrics summarise why we believe WTC is a world class business:
- WTC enjoys 97% recurring revenue with less than 1% churn rate for the last 12 years.
- The company is forecast to generate ~$1.4bn FY26, dropping down to over 30% free cash flow.
We are still keen to add to our existing position.
