Share price falls can create better entry points when the underlying business still has a long runway.
That is how I see Zip Co Ltd (ASX: ZIP) and WiseTech Global Ltd (ASX: WTC).
Both shares have fallen heavily from their highs, both remain volatile, and both still need to keep proving themselves.
Even so, I think they are worth buying today.
Zip shares
Zip shares are down around 35% from their high, despite a strong recent recovery.
The share price has climbed around 25% over the past month, which shows that investors are starting to warm to the story again. But I do not think the opportunity has disappeared.
The reason I like Zip is that the company has moved beyond the old growth at any cost story.
A few years ago, many investors viewed buy now, pay later (BNPL) companies with scepticism, and fairly so. The sector was highly competitive, funding costs mattered, and profitability was not always clear. Zip now looks like a much more disciplined business.
It is the US opportunity that interests me most. Zip is targeting a very large market where many consumers still want flexible payment options and may not be well served by traditional credit products.
If Zip can keep growing transaction volumes while managing credit quality and improving profitability, the upside could be material.
The company will not have a smooth ride. Payments and consumer finance can be sensitive to economic conditions, regulation, and investor sentiment.
But I think the market may still be underestimating what a better-run Zip could become.
WiseTech shares
WiseTech shares have had an even tougher run, falling almost 70% over the past 12 months.
Clearly, sentiment is weak and confidence may take time to rebuild, especially for a company that was once priced for a lot of growth.
But I think WiseTech remains one of the highest-quality software businesses on the ASX.
The company's CargoWise platform helps logistics companies manage the messy work behind global trade. Freight forwarding, customs, compliance, documentation, tracking, tariffs, shipping data, and warehouse coordination all involve enormous complexity. That is where software can become valuable.
I like businesses that solve problems customers deal with every day. WiseTech is trying to become core infrastructure for companies that move goods around the world.
That can create sticky customer relationships if the software keeps improving.
The risks are clear. WiseTech needs to maintain growth, execute on acquisitions, manage governance concerns, and rebuild market trust. A recovery in the share price may not happen quickly.
But I think the long-term opportunity remains very attractive. Global trade is unlikely to become less complex, and logistics companies should keep looking for better digital tools.
Foolish takeaway
I think Zip and WiseTech are both buys, but neither is the kind of share investors should expect to behave calmly.
That is part of the opportunity. The market has already taken a much more cautious view of both companies, even though the long-term growth stories still look alive to me.
Zip needs to keep proving that its recovery is built on better discipline, not just improving sentiment. WiseTech needs to rebuild confidence and show that its software platform can keep growing into a much larger global opportunity.
That makes both shares higher-risk buys, but I think the potential reward is now interesting enough to justify a closer look.
The post Down 35%+, should you buy Zip and WiseTech shares? appeared first on The Motley Fool Australia.
Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. 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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