Leading broker tips NEXTDC (ASX:NXT) share price to race higher

This tech share could be heading a lot higher according to a leading broker…
The post Leading broker tips NEXTDC (ASX:NXT) share price to race higher appeared first on The Motley Fool Australia. –

The NEXTDC Ltd (ASX: NXT) share price has been a strong performer over the last 12 months.

Since this time last year, the data centre operator’s shares have rallied 22% higher.

Can the NEXTDC share price keep climbing?

One leading broker that believes the NEXTDC share price can still run a lot higher from here is Goldman Sachs.

According to a note released this morning, the broker has reiterated its conviction buy rating and put a $14.80 price target on the company’s shares.

Based on the current NEXTDC share price of $11.80, this price target implies potential upside of 25% over the next 12 months.

What did Goldman say?

Goldman notes that one of NEXTDC’s key competitors, Equinix, recently hosted an analyst day and highlighted the robust outlook for interconnected data centres.

Equinix advised that it expects FY 2021-2025 revenue to grow at a compound annual growth rate (CAGR) of 7% to 9%. It also estimates that its total addressable market (TAM) will grow from US$60 billion to US$80 billion by FY 2025.

This appears to support Goldman’s view that NEXTDC is well-positioned to deliver strong revenue and EBITDA growth over the coming years.

Goldman commented: “We remain high-conviction on the growth profile ahead, forecasting +37MW contract wins across FY22-23E (=65% conversion of options). Combined with recent share price underperformance, this gives an attractive growth adjusted valuation. We reiterate our Buy (on CL) on NXT, the most compelling growth story in our coverage.”

Anything else?

In addition to the above, the broker notes that merger and acquisitions activity is continuing in the global data centre market and this could soon include NEXTDC. Goldman suspects that the company could be interested in acquiring the Australian assets of Global Switch.

It estimates that NEXTDC would require $550 million to $900 million of equity if acquired for $1.2 billion to $1.6 billion. This would represent a 14-18x EV/EBITDA applied to calendar year 2019 EBITDA. Though, it acknowledges that the company has not confirmed whether it would be interested in such an acquisition. This might be something for investors to look out for.

The post Leading broker tips NEXTDC (ASX:NXT) share price to race higher appeared first on The Motley Fool Australia.

Should you invest $1,000 in NEXTDC right now?

Before you consider NEXTDC, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and NEXTDC wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

More reading

5 things to watch on the ASX 200 on Friday

Why analysts love Zip (ASX:Z1P) and these fantastic ASX growth shares
2 fantastic ASX 50 shares rated as buys

First time in 30 years! 6 ASX shares for crazy times: analyst

How Microsoft’s new Xbox could spur ASX data centre shares

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

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!