The WiseTech Global Ltd (ASX: WTC) share price is looking less appetising to investors on Wednesday. Despite being the best-performing of the 'WAAAX' shares this year, the logistics software provider is not immune to today's antics.
Racing toward the end of an unnerving day, WiseTech shares are trading hands for $58.35, down 4%. For context, the Australian benchmark index is on track for its worst day since 14 June this year. A day that was also dominated by inflation fears.
Although, why would the WiseTech share price be in the crosshairs on Wednesday?
Premium valuations get sliced
Anyone that has been investing for at least a year or so knows what inflation has meant for ASX shares. Today, shareholders have been sat down for yet another hard lesson in the fickle nature of short-term news and reactions.
I'm talking about the US consumer price index (CPI) data from last night, of course. A slightly higher reading than expected — coming out at 8.3% compared to a year ago — sent overnight markets into turmoil.
The prospects of steeper and more prolonged interest rate increases sounded the sell siren for some. What followed was a trampling of share prices, with the worst dealt to consumer cyclicals and tech.
As is often the case, the ASX is mimicking our US neighbours today. At the moment, the information technology sector is down 3.7%, while the consumer discretionary segment is 3.1% worse off.
The WiseTech share price has been caught up in the selling. Though, other tech shares in the S&P/ASX 200 Index (ASX: XJO) are suffering to an even greater extent. For example, Megaport Ltd (ASX: MP1) is down 11% and Novonix Ltd (ASX: NVX) has taken a 6% haircut.
It appears investors are particularly uneasy about holding ASX shares with premium valuations in light of the news.
For instance, based on the current WiseTech share price, the company trades on a price-to-earnings (P/E) ratio of around 98. This compares to the software industry average of roughly 48 times earnings. Meanwhile, the broader index trades on a multiple of 14.7 times earnings.
What this means for the WiseTech share price
If and/or when interest rates are increased further, the WiseTech share price may look less appealing. Despite the company being debt free and holding over $480 million in cash, there are other considerations likely to be at play.
Given the premium P/E ratio, investors might be inclined to be warier as central banks move to cool down economies. In addition, if interest rates on savings accounts get a greater bump, more investors could favour a less risky cash alternative for reasonable returns.
In both scenarios, the WiseTech share price could retreat further.
