Megaport shares extend losses as analysts cut target prices
Make us a preferred source
Make us a preferred source on Google
The news: Megaport shares tanked in morning trade on the ASX after the Network as a Service (NaaS) provider's trading update disappointed analysts on Friday.
The numbers: Megaport shares were down 3.2% to $7.33 by midday AEDT, making it the worst performing ASX 200 stock, having tumbled 9.5% in the previous session.
Analysts made the following revisions to their ratings after Megaport reaffirmed its muted full-year guidance last week:
- Morningstar lowered its fair value estimate by 16% to $10.50 per share;
- Macquarie kept its 'outperform' rating but cut its target price from $10.70 to $10.20; and
- Goldman Sachs reiterated its 'buy' rating but reduced its target price 13% to $10.40.
The context: Morningstar analyst Roy Van Keulen said that Megaport's update indicates the company has "significantly overestimated" its pricing power in recent years and "now appears to be in an uncompetitive position".
Van Keulen noted that the company now needs to either lowers its prices, expend more resources to achieve continued growth, or hope that its competitors raise prices.
Goldman Sachs analysts said that Megaport is not yet seeing or expecting any acceleration in revenue growth, which they attribute to ongoing backbook pricing issues.
Macquarie analysts said that they are not surprised by Megaport's trading update, given the volatility in the stock over the last 18 months, but they like the company's "long-term story".
The sources: Morningstar research, Macquarie research, Goldman Sachs research
