Swearing off acquisitions – perhaps only for a while – has managed to change investor confidence in WiseTech, the shipping logistics, and data company.
For much of the past six months, investors have been increasingly sceptical of WiseTech’s aggressive acquisition strategy which triggered a short-selling assault on the company in late 2019.
That prompted a slide in the share price, a weakness that was added to with a weak interim report in February when the shares fell 27%, to $21.44 when the company revealed that he effective shutdown of China was “creating negative flow-on effects to manufacturing, slowing supply chains and economic trade across the world”.
The shares slumped to just over $10 in the post-February 20 sell-off as investors worried that a company with global operations and ambitions would be hit hard by the impact of the COVIF-19 pandemic on world economic activity and trade.
Yesterday the company reaffirmed its current 2020 revenue and earnings guidance (which were lowered in February) despite the logistics market being hit hard by the coronavirus which led to a disastrous downgrade at its half-year results in February.
The February results saw WiseTech cut its revenue guidance from a range of between $440 million and $460 million to between $420 million and $450 million.
And its Earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance was cut from a range of $145 million and $153 million to between $114 million and $132 million.
But yesterday those figures and the accompanying comment – more realistic in tone than seen for a while from the company – saw the shares leap 16.7% to $$16.09.
Helping convince investors was more news in the Wednesday statement about more cost-cutting that will hit spending on technology.
But the biggest factor behind the rise in the share price was the suspension of its controversial acquisition strategy.
“In this challenging economic environment, we will take necessary actions to prioritise critical technology development, be highly cost-efficient, safeguard our financial strength and continue to build our financial position,” Wisetech CEO Richard White said in the statement to the ASX.
Wisetech said on Wednesday its business traded in line with expectations for the three months ending March 31 with new customers and underlying growth offsetting reductions from COVID-19 disruptions including “a slowdown in new business growth”.
The company said that while its business remains resilient, it believes COVID-19 will continue to adversely impact many economies and global supply chain movements.
That sort of warning no longer seems to stampede the horses, so to speak among the investment public and analysts.
All now is forgiven? For how long though?
