Global markets were lower overnight, as US stocks sold-off after data showed US construction spending dipped in December, igniting fears around an economic slowdown.
2019 has been strong month for equity markets which have rebounded after heavy selling late last year. While global risks remain, the NZ market is back at an all-time high, while the Australian market index is trading at a 6-month high. Policy shifts by central banks and governments, especially in the US and China, seem to be helping support investor confidence for now.
Stock in Focus: WiseTech Global (WTC:ASX)
Shares in logistics software as a service company Wisetech Global have continued to experience a wild-ride, slipping after releasing their 2019 first result, despite delivering a solid result with revenue of $156.7m and net profit after tax of $23.1m which were both up +68% and 48% respectively.
The solid result was due to continual investment in its software platform and further acquisitions driving revenue growth and maintaining impressive customer retention figures. The shares fell due to management maintaining their revenue and earnings guidance for the 2019 financial year, with the market anticipating another guidance upgrade.
A week later, WTC shares slipped again, as they downgraded earnings guidance for the 2019 full year, following the acquisition of Containerchain, but upgraded revenue guidance. The extreme moves experienced by WTC shares this year reinforce our concerns around the company’s expensive valuation, with the market pricing in a tremendous amount of growth. WTC is a quality company, however performance may miss the market expectations with the bar set high.
We currently have a HOLD rating on WiseTech.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.40%) with the ASX hitting a 6-month high. The major miners were among the market leaders on Monday as the price of iron ore climbed on restocking demand, spurred by improved steel sales. Nufarm shares climbed amid speculation Wesfarmers was considering a takeover bid for the company, with chief executive Rob Scott reportedly interested on acquisitions, particularly in the chemicals space.
The New Zealand market rallied on Monday (NZX 50 index +0.66%) as NZ shares rose to a record high as the prospect of a trade deal between the US and China helped buoy stock markets across Asia. Dairy exporters A2 Milk and Synlait Milk were among the day's leaders. Outside the benchmark index, Wellington Drive Technologies fell 10 percent, or 2.5 cents, to 24 cents after reporting positive earnings and revenue growth of 36 percent after trading ended on Friday.
3 Things Markets Will be Watching this Week
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- The final few local companies report earnings this week, wrapping up the current earnings season.
- Important monthly US employment data is released at the end of the week.
Have a Great Day,
Team
