WiseTech soars to all-time highs – Is it too late to buy?

WiseTech Global (ASX: WTC) shares briefly rallied 22% in early trade on Wednesday after reporting a clean sweep of better-than-expected numbers for FY24.

The strong performance has pushed WiseTech's stock price above $110 for the first time, and the company's market capitalisation has now ballooned to a staggering $30 billion.

This begs the question - Has WiseTech's meteoric rise made the stock too expensive for investors at current levels?

FY24 Results Summary

• Revenue +28% to $1.04 billion

• Underlying EBITDA of $495.6 million vs. guidance of $455-490 million

• EBITDA margin of 48% vs. 47% a year ago

• Underlying net profit +15% to $283.5 million

• Earnings per share +23% to 79.4 cents

• Total dividend for FY24 of 16.9 cents

• FY25 EBITDA guidance of $680 million (at the midpoint or 37% year-on-year growth)

The net profit, dividend and FY25 guidance numbers were 6.0%, 5.6% and 8% ahead of Goldman Sachs estimates (as of 30 June 2024).

Why the massive rally?

It's pretty wild to see the $30 billion market cap of Wisetech rally as much as 22% in a single session. The big move all comes down to the above consensus numbers.

Goldman Sachs had a rather muted view of Wisetech back in June, with a Neutral rating and a $91 target price.

"The organic revenue growth outlook for Cargowise remains a key focus area ahead of its FY24 result ... we believe it needs to accelerate towards circa 30% in FY25e to meet consensus expectations and management commentary around its ability to sustain growth," the note said.

For a more bullish view, the analysts wanted to see growth re-accelerating to 30% in FY25 and margins trending towards more than 50% by FY26. And WiseTech delivered on both, with its FY25 EBITDA guidance pointing towards 37% year-on-year growth and FY24 margins up 100 bps to 48%.

Cargowise revenue was another positive surprise, up 33% to $88.3 million. The company says this growth was driven by the "full and part-year effect of FY23/FY24 M&A and customer growth including new Large Global Freight Forwarder rollouts."

The strong set of FY24 numbers also translated into a full-year dividend of 16.9 cents (20% payout ratio), which was 8% ahead of estimates. And as we all know – the market loves a dividend beat.

Putting it all together:

• All key financial metrics (net profit, dividend and guidance) beat analyst expectations

• Strong earnings resulted in a better-than-expected dividend (not that investors hold Wisetech for its dividend but its a nice to have)

• Flagship Cargowise earnings are strong and three major product launches are set to be released in the coming weeks/months

What happens now?

Wednesday's vertical move has resulted in a substantial amount of profit-taking. You can tell just by looking at the price action:

• Open: Up 18.8% to $112.15

• Session high: Up 21.8% to $114.99

• At 10:30 am: Up 14.7% to $108.30

• At 11:00 am: Up 12.1% to $105.90

Goldman Sachs said Wisetech was trading at an 8% premium to historic EV/EBITDA averages. While today's earnings beat market expectations, the net result (subject to how the stock closes) is that it's become a little more expensive.

Source: Goldman Sachs June 2024

The price tag will be hard for brokers to ignore. Over the next 12-24 hours, they will most likely:

• Raise their target prices (as they lift their FY25 earnings expectations)

• But the upgraded target price might be below the current share price as the stock has rallied pretty hard and trading well-above historic multiples

• Depending on their models, brokers will either i) upgrade earnings expectations (and therefore their target prices) resulting in a Buy rating or ii) retain or downgrade their rating (due to the difference between the current share price and target price)

Putting aside the ratings and target prices, today's result once again demonstrates WiseTech's longstanding track record of meeting and exceeding growth expectations.

Related content from our network regarding the WiseTech result:

• Earnings call highlights

• Fund Manager insights