At time of writing, WiseTech Global Limited [ASX:WTC] shares are trading at $16.59, a whopping 9.59% down from yesterday’s trading price.
No doubt, today’s fall comes from the extreme Wall Street sell-off that has taken place over the last 24 hours.
As a developer of cloud-based software for both domestic and international industries, WiseTech was sure to have suffered during the drop in the NASDAQ.
Tech sector takes a hit
Every market on Wall Street felt a move, with the NASDAQ dropping by 4.08%.
This decline has occurred with the rising interest and employment rates of the US, making the risky environment that is the stock market less appealing.
InvestSmart chief market strategist Evan Lucas insists this is just a necessary correction for the recently booming tech sector of the market. He explains:
‘A lot of money has been flowing into them [tech stocks] very, very quickly for quite a long time, almost indiscriminately of the underlying earnings of the companies…The ingredients are there for a significant correction and corrections do start fast.’
But is this entirely the case for WiseTech?
A rough couple of weeks for WiseTech
WiseTech shares had started dropping in price before the Wall Street sell-off frenzy of the last 24 hours.
In fact, since the release of their annual report on 28 September each market close has seen a fall in WiseTech’s share value.
The report revealed the company’s admittance that their financial results ‘are subject to a number of risks…[which] are not directly within WiseTech’s control’.
For instance, the success of their single-platform solution CargoWise One relies on the company maintaining the program adequately and avoiding new errors and performance issues cropping up.
The report highlights the possibility that WiseTech may fail to keep up such maintenance ‘due to various reasons, such as insufficient investment, unforeseen costs, poor performance and reliability, low customer acceptance, existing competition or economic and market conditions’.
Following this, WiseTech admit in the report that the retention of key personnel — such as their founder and CEO, Richard White — is essential for their success. They also ‘need to attract and retain highly skilled software development engineers. Competition for such personnel is intense’.
Indeed it is — and investors are aware of this.
Is it game over?
Well, no matter how innovative the product, there’s always risk involved.
But Cloud-based solutions are the road ahead for tech companies, and CargoWise One is a strong example of such a technology.
Customers can use the software 24/7 and only need to pay for the modules they actually use. It’s also usable in multiple languages.
As such, CargoWise One could be the thing that keeps WiseTech in the highest-growing area of the tech sector, which is forecast to reach US$165 billion by 2022.
There’s still room for the company to right itself.
For Money Morning
PS: There may be an emerging arm aiming to take hold of the tech sector that you aren’t aware of…China. In this free report, find out how Aussie investors could potentially win big when China takes on Silicon Valley. Download your free report, ‘The New Silicon Valley: How You Could Profit When China Takes Over Tech’ now.