Short Seller Report Took Chunk out of WiseTech Share Price: Buy or Sell?
At time of writing, the share price of WiseTech Global Ltd [ASX:WTC] is up marginally by .23%, trading at $25.78.
You can see how the WiseTech share price reacted to a short seller report in late October:
We examine the case for a buy or sell on WTC shares in the aftermath of the short seller report.
How much did the short sell report hurt WiseTech’s share price?
From a high of $38.80 on 6 September, the WiseTech share price has shed just over a third of its value in the last three months.
The fall in October was particularly sharp.
At issue were a number allegations by J Capital Research about WiseTech’s business, in particular its acquisitions.
Two reports came out from J Capital Research, the second one wiping 12.33% off the share price in an hour.
WiseTech vigorously defended itself, releasing a detailed rebuttal and noting that:
‘The publisher of the report discloses that it may realise significant gains from a decline in WiseTech’s share price.’
The case for buying WiseTech shares
I think if there is a case for buying WiseTech shares, it would largely have to come from a short-term technical view.
It dipped below 30 on the relative strength index (RSI) after the late October sell-off, and if this was your entry point, you could try and wait it out until it starts climbing back up towards 70, or ‘overbought’ territory.
The case for selling WiseTech shares
The case for selling Wisetech shares at this share price rests on some fundamental aspects of the business.
For starters, they have been on an acquisition campaign that saw them pick up 35 smaller companies.
They now have a P/E ratio of around 145 — which could be viewed as lofty for a company that claims to have 43 of the top 50 global third-party logistics providers as customers.
One may reasonably wonder how much growth there is out there for a company that has so much market penetration.
They are splitting 50% market share with a Canadian company called Descartes at the moment, according to the J Capital report (25%/25%).
The future for WiseTech
It’s a mixed bag for WiseTech shares at the moment — which might be why it has traded sideways of late.
It’s a matter of determining whether one is prepared to accept the risk of a technical punt.
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