Why WiseTech Global Ltd shares are racing higher

It certainly hasn’t been an easy time to be a WiseTech Global Ltd (ASX: WTC) shareholder over the last couple of months.

Since peaking at $16.27 in February, the logistics software platform provider’s shares had fallen a remarkable 41.6% to $9.49 prior to today.

Thankfully for shareholders things are starting to look a little more positive today after its shares raced 6% higher to $10.06.

Why are WiseTech Global’s shares racing higher today?

With no news out of the company, today’s gain is likely to be attributable to a broker note out of Citi this morning.

According to the note, Citi’s analysts have upgraded WiseTech Global from a sell rating to neutral rating following its sizeable share price decline. The broker has also lifted its price target from $9.02 to $9.51

Citi had previously downgraded the company’s shares to a sell rating after they rallied well beyond the broker’s estimated intrinsic value.

While a neutral rating isn’t necessarily something to get excited about ordinarily, the market appears to be treating it as a sign that WiseTech Global’s share price decline is now over.

Should you invest?

Based on Citi’s earnings per share forecasts for the company (13.6 cents in FY 2018 and 19.8 cents in FY 2019), WiseTech Global’s shares are changing hands at 74x FY 2018 earnings and 51x FY 2019 earnings.

While this isn’t necessarily cheap, considering its solid growth prospects, it is starting to look a little more attractive now.

However, it is worth noting that not all brokers agree with Citi. Credit Suisse still has a sell rating and lowly $7.10 price target on the company’s shares. This price target implies potential downside of approximately 30% for its shares over the next 12 months.

I plan to continue to sit this one out and wait in hope of a better entry point. Until then I’ll be considering Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium, Appen Ltd, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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