Markets

WiseTech rallies the most in 3 years – Is it time to jump back on board?

Fri 25 Oct 24, 1:27pm (AEDT)
Aerial snapshot of shipping and cargo port
Source: iStock

Key Points

  • WiseTech shares surged 22% after CEO Richard White's sudden resignation amid workplace misconduct allegations, with CFO Andrew Cartledge stepping in as Interim CEO
  • Major investment banks including Morgan Stanley, RBC Capital, and Goldman Sachs maintained bullish outlooks despite the leadership change, viewing recent volatility as a buying opportunity
  • Analysts remain confident in WiseTech's growth prospects, citing strong CargoWise adoption potential and forecasting 37% EBITDA growth in FY25, with shares trading at reasonable valuations

WiseTech (ASX: WTC) shares rallied 22% as the market opened on Friday after announcing the sudden resignation of founder and CEO Richard White.

This marks WiseTech's best day since 25 August 2021, when the stock rallied 28% after reporting a blowout FY21 result.

Mr White's resignation follows an ongoing investigation by Nine Newspapers, which uncovered numerous sexual and workplace bullying allegations.

CEO Departure

The coverage of Mr White's allegations and scandal has been extremely thorough. You can catch all of the coverage from the Financial Review here.

Mr White will step down as Director and CEO with immediate effect. The company announced this news after the market's close on Thursday. The key takeaways include:

  • CFO Andrew Cartledge will assume the role of Interim CEO, effective immediately

  • Deputy CFO Caroline Pham will step up as Interim CFO

  • A global search for a new CFO is already underway and will soon commence a global search for a permanent CEO

Two things stand out from this announcement.

  1. Mr Cartledge is supposed to retire. He informed the company of his intention to retire at the end of calendar year 2025 on 6 August 2024. Funnily enough, he has now been promoted to Interim CEO. He says he is available to stay on beyond his planned retirement, as needed by the company.

  2. Mr White is still a 'CEO': His new consulting title literally has the word CEO in it. The role title is called "Founder and Founding CEO".

Thursday's Session

Before we dive into some analyst takeaways – Thursday's session was rather interesting.

  • WiseTech shares opened the session breakeven but finished 6.3% lower

  • Volume for the session (2.78 million shares) was on par with Monday's selloff (2.89 million shares). WiseTech shares tumbled 14% on Monday after the company responded to media reports

  • WiseTech did not announce any market-sensitive news during the session. The CEO stand down was announced after hours.

WTC 2024-10-25 11-19-10
Source: TradingView

Bullish Analysts

While the leadership change has introduced some short-term uncertainty, analysts largely viewed it as a temporary disruption, with minimal impact on the company's strong fundamentals.

Some of the changes from analysts over the past 24 hours include:

  • Morgan Stanley maintained an OVERWEIGHT rating but cut its target price from $135 to $120. The analysts reiterated long-term fundamentals and viewed the current volatility as a buying opportunity. Despite the price cut, there were no changes to their earnings forecasts.

  • RBC Capital upgraded the stock to OUTPERFORM (from Sector-perform) and raised its target price from $115 to $125. They viewed the leadership change as positive, breaking the governance overhang. The Board review and governance risks may persist but should have no immediate financial impact. Similarly, the current volatility was viewed as an attractive entry point for long-term investors.

  • Goldman Sachs upgraded the stock to BUY from Neutral and retained a $138 target price. Not to sound like a broken record but they also said the recent selloff presents a strong buying opportunity for long-term investors. They view the current valuation as reasonable amid growth acceleration and new product rollout.

  • JPMorgan retained an OVERWEIGHT rating and $123 target price. They see succession planning progress as key to easing the current overhang/investor concerns.

High Growth At A Reasonable Valuation

"We believe the significant sell off in WTC presents a compelling opportunity to buy one of Australia’s best global growth stories, ahead of an acceleration in its organic earnings growth, at a reasonable valuation," Goldman Sachs analysts said in a note on Friday.

The bullish thesis centred around:

  1. We believe the adoption of CargoWise is a matter of when, not if for all large freight forwarders, providing material scope for new customer acquisition

  2. We see a large opportunity to expand customer ARPU, through both existing proven products (i.e. customs) and new white space products being launched

  3. WiseTech has a track record of delivering profitable growth

  4. Valuation screens more reasonable. WiseTech is trading on a 12 month EV/EBITDA of 44x, a 1% discount to its five-year average, despite this re-acceleration in earnings growth

Goldman is forecasting FY25 EBITDA and net profit to rise 37% and 44% respectively. They highlighted the company's upcoming AGM (22 Nov), Investor Day (3 Dec) and 1H25 result (Feb-25) as key catalysts.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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