Why Wisetech shares are rocketing today (how much higher can they go?)

With Altium potentially about to be snapped up by Japanese semiconductor giant Renesas Electronics, Wisetech Global (ASX: WTC), is one of the few remaining global tech platform plays left on the ASX.

Today, Wisetech released its first half FY24 results and is enjoying a tidy 12% gain at the time of writing. Let’s investigate why the market loved the result so much, as well as check out Wisetech’s chart to see how much upside might remain.

Headline Numbers

• Sales $500.4m (+32%)

• NPAT $128.4m (+5%)

• EBIT Margin 46.0% (-4pp)

• Dividend 7.7 cps (+17%)

Better/Worse than expected?

BETTER:

• Sales 2% above consensus

• NPAT 22% above consensus

• EBIT Margin 5% above consensus

Key Highlights

• Management believes "integration of our recent acquisitions is also progressing well"

• Organic EBITDA margin was steady at 53% (drops to 46% after dilutive acquisitions impacts) – this was a key beat in today’s results

• Operating expenses fell 2 percentage points on lower Product design / development  and General / administrative expense, helping maintain margins

• Operating cash flows 23% higher demonstrating highly cash-generative operating model

Outlook statements

• FY24 sales guidance range of $1.04b-$1.095b reaffirmed (consensus $1.07b)

• FY24 EBITDA guidance range of $455m-$490m reaffirmed (consensus $473.4m)

• FY24 EBITDA margin guidance range increased to 44%-46% (consensus 41%-42%)

Market response so far

• Stock price: +12.5%

• Evans & Partners: "As such a beat across the board, with material beats from EBITDA downwards. Capitalisation rates have had some impact on EBITDA overall but still looks good quality."

• RBC Capital Markets: "We expect strong share price performance today on these numbers. Strong secular growth story that does not appear to be impacted by freight volume disturbances on a macro level (e.g. Red Sea)"

Chart

Wisetech has regained its ascendency as Australia’s premier global tech platform play

ST/LT Trends: ⬆️ / ⬆️

Price action: 📈

Candles: ⬜

Commentary: The technicals were showing signs of increasing excess demand heading into today’s result, so the current price response is little surprise. Today’s close is crucial. If WTC can end the session close to its high (currently $90.23) it will confirm today’s candle as a long white body. This would be an impressive showing of unfulfilled excess demand, and would demonstrate investors still see significant value in WTC, even after its substantial rally.

Short and long term trends, as well as price action are further exemplary indicators of strong demand in the system. Perhaps the only sticking point, then, is the major historical point of supply at $88.69. Historical points of supply often act as future points of supply, so a close above $88.69 in the short term (preferably even today) would be a good indication it’s no longer influencing the WTC price.

Carl’s Technical Analysis Methodology Key

Trends

ST Trend ribbon: 21 & 34 EMAs || LT Trend ribbon: 144 & 233 EMAs

⬆️ = Uptrend, the ribbon is rising indicating a higher probability the market is in a general state of excess demand

⬇️= Downtrend, the ribbon is declining indicating a higher probability the market is in a general state of excess supply

➡️ = No trend, the ribbon is flattening indicating a higher probability the market is in equilibrium

Price Action

📈 = Rising peaks and rising troughs indicating buy-the-dip activity and supply removal (i.e., indicating a higher probability market is in a general state of excess demand)

📉 = Falling peaks and falling troughs indicating sell the rally activity and demand removal (i.e., indicating a higher probability market is in a general state of excess supply)

⬅️➡️ = Neither of the above scenarios, market price action is indecisive

Candles

⬜ = Predominantly demand-side candles in the recent past, i.e., white bodies and or downward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess demand)

⬛ = Predominantly supply-side candles in the recent past, i.e., black bodies and or upward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess supply)

⬜⬛ = Mixed, i.e., indicating no discernible trend towards demand-side or supply-side candles in the recent past