One of the few companies to end last week on a high was data centre operator NextDC Ltd (ASX: NXT).
Anxieties around the global spread of coronavirus continued to send the share market tumbling on Friday, but the NextDC share price bucked the trend, surging over 6% higher. The strong performance on Friday meant that the NextDC share price finished the week in the green overall, climbing 0.6% higher for the week.
That might not seem like much, but compare it against the performance of some other tech market darlings during the equity rout last week and it starts to feel more impressive. Software company Altium Limited (ASX: ALU), machine learning and artificial intelligence company Appen Limited (ASX: APX) and buy now, pay later fintech Afterpay Limited (ASX: APT) all suffered double-digit losses last week.
What was the driver for NextDC's gains?
NextDC released its first half FY20 results to the market on Friday morning, which provided a brief bright spot in an otherwise cloudy day for the ASX.
The company announced revenue growth of 8% over first half FY19 to $97.7 million, while underlying EBITDA surged 21% higher to $50.9 million. NextDC also reaffirmed its full year FY20 revenue guidance of $200 million to $206 million and underlying EBITDA in the range of $100 million to $105 million.
NextDC's operations seem largely unaffected by the spread of coronavirus, which is great news for investors seeking refuge from the selloff occurring across other sections of the market. But that's not to say NextDC's results were perfect across the board. The company posted a net loss of $4.9 million; a $1.7 million greater loss than it posted this time last year.
NextDC blamed this on higher depreciation and interest costs on its expanding network. It has recently completed expansions on its data centre in Melbourne, while development on its centres in Perth and Sydney are ongoing. Whether or not this heavy investment in infrastructure will come back to bite NextDC in a time when the global economy may be experiencing a rapid slowdown will remain to be seen.
But investors seem to have responded well to NextDC's "business as usual" approach during this unfolding coronavirus crisis. It is reassuring for investors to find a company whose results and outlook seem largely unaffected at a time when many other companies are slashing their full year growth forecasts.
Foolish Takeaway
Over the last few months, NextDC has delivered strong returns to its shareholders, and it is great to see its share price holding up even in the face of the current coronavirus crisis. Since the beginning of 2020, NextDC's share price has surged 21% higher – and it has proven itself to be something of a safe haven for investors seeking normalcy in these times of extreme market uncertainty.
However, it does come with some risk. It's not great to be incurring higher costs when broader economic growth is slowing. NextDC will need to grow its revenues to cover those costs at a time when business activity might be contracting.
However, it's also worth noting finally that the company has a very healthy balance sheet, with $197 million in cash and cash equivalents on hand. This gives it a pretty significant cash buffer to ride out the economic impacts of the coronavirus outbreak.
