WiseTech Global Ltd (ASX: WTC) shares are now down 9.5 per cent this week despite the freight cargo software business not releasing any specific news to the market.
The stock is tumbling alongside other richly valued tech plays on the back of renewed concerns that the US and China may not reach an initial trade deal by a December 15 deadline.
If no agreement is reached the U.S. has threatened to impose higher tariffs on a range of Chinese imports.
WiseTech has made the headlines recently after being accused of artificially inflating its organic profit and revenue growth rates by an overseas-based short seller.
WiseTech has dismissed the allegations and at its November 19 AGM told the market it's on track to deliver FY 2020 EBITDA between $145 million to $153 million on revenue between $440 million to $460 million. If the mid-point of guidance is achieved it would equal fiscal year growth at 37% and 29% respectively.
It's worth noting the EBITDA (operating income) is growing faster than the revenue as WiseTech is a software-as-a-service (SaaS) business that boasts high gross profit margins and the sweet spot of recurring revenues delivered on relatively fixed operating costs.
Even at $25 this afternoon the stock's valuation is still high using conventional SaaS valuation metrics and off the charts if you use traditional price-to-earnings metrics.
Given the backdrop the stock is likely to remain volatile through 2020.
Other SaaS-based businesses impressing investors recently include Xero Limited (ASX: XRO) and Technology One Limited (ASX: TNE).
