Here’s why the NextDC (ASX:NXT) share price is racing higher

The NextDC Ltd (ASX:NXT) share price is racing higher on Wednesday after being the subject of a very bullish broker note…
The post Here’s why the NextDC (ASX:NXT) share price is racing higher appeared first on The Motley Fool Australia. –

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company

The NextDC Ltd (ASX: NXT) share price has been a positive performer on Wednesday.

In morning trade, the data centre operator’s shares are up 4% to $11.45.

Why is the NEXTDC share price charging higher?

Investors have been buying NextDC shares following the release of a bullish broker note out of Goldman Sachs this morning.

According to the note, the broker has reiterated its buy rating, added the company to its conviction list, and lifted its price target to $15.00.

Based on the latest NextDC share price, this implies potential upside of 31%.

What did the broker say?

Goldman Sachs recently hosted a number of data centre meetings with a range of industry participants. These meetings have collectively reinforced its positive view on NextDC.

The broker listed four key takeaways from these events. They are summarised below:

(1) Demand remains very strong, with ‘waves’ of demand to continue but potentially larger and more spaced out than previously, while the quantum of deployments continues to surprise (i.e. individual orders of 20-40MW);

(2) Pricing (and hence returns) remains healthy in Australia across all operators, supporting our return expectations (we forecast 11.3% ROIC on NXT’s S3 facility);

(3) NXT is likely to progress its S4/M4 facility as a JV, away from the CBD, while keeping optionality to undertake a JV for part of M3/S3; and

(4) International is strategically sound, but unlikely to progress while borders are closed.

High multiples are not a concern

While Goldman acknowledges that there are concerns around equity valuations due to rising bond yields, it believes NextDC’s shares are more than deserving to trade at a premium.

Goldman explained: “We note investor concerns around the expected increase in inflation that is impacting equity valuations. However we believe the strong growth outlook for NextDC remains compelling, particularly given its hyperscale contracts have inflation escalators embedded within them.”

“As a result, with NXT having pulled back -23% since its Oct-20 high ($14.10; vs ASX200 +10% ) despite subsequently upgrading FY21 guidance, we see now see a more compelling investment opportunity. With our $15.00 TP implying +36% upside, amongst the highest in our TMTG coverage, we re-iterate our Buy and add NXT to the ANZ Conviction List,” it concluded.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the NextDC (ASX:NXT) share price is racing higher appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!