I think WiseTech Global Ltd (ASX: WTC) could become a substantially larger business over the next decade.
And one reason I'm so positive is that the company is changing how it makes money and expanding the range of services it can offer customers.
I believe these developments could unlock years of earnings growth, making WiseTech a share I'd be happy to buy and hold until at least 2036.
A new way to grow
For years, WiseTech has been building CargoWise into an essential technology platform for freight forwarders and logistics companies.
However, its recently introduced CargoWise Value Packs could take the business to another level.
Previously, customers paid a combination of licence fees, transaction charges, and fees for additional features.
The new model simplifies this by charging customers for individual logistics transactions, such as shipments or customs declarations, while including a much broader range of software capabilities.
I think that's an important change. It makes costs easier for customers to understand and reduces the barriers to adopting more of WiseTech's technology.
It also creates opportunities for WiseTech to earn more as customers process additional shipments and automate more of their operations.
And the early signs are encouraging. More than 95% of CargoWise customers are now using the new model.
I believe this approach could become increasingly valuable as WiseTech introduces more automation and artificial intelligence (AI) capabilities.
If its software helps customers complete more work with fewer employees, there could be opportunities for WiseTech to capture more of the value it creates.
Why e2open could transform WiseTech
I'm equally optimistic about what the acquisition of e2open could mean over the next decade.
CargoWise has traditionally focused on the companies responsible for moving goods around the world. E2open expands WiseTech's reach into the businesses that manufacture, buy, and sell those goods.
Its technology helps companies plan their supply chains, manage suppliers, coordinate distribution, and improve visibility across their operations. And it brings a network connecting more than 500,000 enterprises.
I think the opportunity to connect these businesses with CargoWise's logistics customers is enormous.
Imagine a manufacturer being able to manage more of its supply chain, from planning purchases and coordinating suppliers through to arranging international shipments, within an increasingly connected software ecosystem. That's the direction WiseTech is pursuing.
Over time, I believe combining these capabilities could help the company attract new customers while generating more revenue from existing relationships.
There are also opportunities to improve e2open's profitability. WiseTech is transitioning the business towards a more standardised, product-led model, which should make its software easier to develop and deliver at scale.
And the integration has already generated US$64 million in annualised cost savings, ahead of management's original target.
Looking towards 2036
I don't expect everything to go smoothly. E2open's revenue is expected to remain flat in FY27, with some customer attrition continuing as its business model changes.
The acquisition has also increased WiseTech's debt, while its growth ambitions will require continued investment and strong execution.
However, I think the potential rewards justify those challenges. WiseTech is targeting underlying EBITDA growth of 12% to 21% in FY27, supported by cost savings and its expanding software capabilities.
And if the company can continue increasing the number of businesses using its technology, I believe its earnings could grow substantially over the following decade.
Foolish takeaway
What I like most about WiseTech is the opportunity to become a much more important technology provider across global trade.
Its new commercial model and e2open acquisition could allow it to earn more from a much broader range of customers.
I believe that creates a compelling long-term opportunity, and I'd be happy to buy WiseTech shares with a view to holding them for at least 10 years.
The post Why I'd buy and hold WiseTech shares for 10 years or more 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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