The NextDC (ASX:NXT) share price just hit a 9-month low despite broker upgrades

The NextDC Ltd (ASX: NXT) share price has taken a beating this week but brokers think there's light at the end of the tunnel

| More on:
asx share price falling lower represented by investor wearing paper bag on head with sad face

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

NextDC Ltd (ASX: NXT) shares slipped to a 9-month low this week despite an upbeat half-year result which included an upgrade to its FY21 guidance. While the NextDC share price has gone south, some big brokers were impressed with the results and have maintained a bullish stance. 

Broker ratings for the NextDC share price 

On 2 March, Morgan Stanley retained an overweight rating for the NextDC share price with a $14.60 price target. The broker noted that the company's first-half revenues and operating income were ahead of estimates with a strong pick up in business activity in the new year. 

Citi is also bullish on the NextDC share price but made a slight price target adjustment from $14.80 to $14.45 with a buy rating on 4 March. The broker described the company's results as solid, with revenue and operating income margins ahead of forecasts. Themes such as accelerated cloud adoption and digitisation were factors behind the broker's positive view. 

1H21 highlights 

NextDC's half-year results were solid across all reporting metrics. The company delivered a 27% increase in revenue to $121.6 million and a 29% improvement in earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $65.7 million.

The company is still on its journey to profitability, reporting a loss after tax of $17.5 million. NextDC is well capitalised for growth with $716 million in cash and cash equivalents as of 31 December 2020. It also has a number of debt facilities to provide additional liquidity and capital if required. 

Taking a look at the bigger picture, NextDC has delivered a compound annual growth rate (CAGR) of 21% for revenue and 32% for EBITDA since 2H17. It highlights the increasing use of hybrid cloud and connectivity both inside and outside the data centre as customers expand their digital ecosystems. 

Upgraded guidance fails to ignite NextDC share price 

Upgraded guidance is always the icing on the cake after a solid earnings announcement. NextDC upgraded its revenue guidance to $246 million to $251 million (previously $242 million to $250 million). The business is seeing strong growth in recurring data centre services revenue, underpinned by long-term customer contracts. 

The company's continuous investment into new centres creates additional capacity and inventory across all markets to drive further enterprise and network opportunities. 

Foolish takeaway

Strong results, upgraded guidance and positive broker ratings have been unable to turn the NextDC share price around so far this week. The company's shares have dropped by more than 5% since its half-year result and by nearly 14% year to date. 

However, it's not just the NextDC share price that's been underperforming. The S&P/ASX 200 Info Tech (ASX: XIJ) index has also been struggling, falling by more than 10% in February, despite the ASX 200 closing 1% higher. 

Wondering where you should 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 over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Kerry Sun 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.

More on Share Market News

Rising gold share price represented by a green arrow on piles of gold block.
Gold

Up 72% in 2025, why is this ASX 200 gold stock racing ahead of the benchmark again today?

Investors are bidding up this high-flying ASX 200 gold stock again on Thursday. But why?

Read more »

A woman wearing a black and white striped t-shirt looks to the sky with her hand to her chin contemplating buying ASX shares today as the market rebounds
Share Market News

Where could the RBA interest rate go in the next 12 months?

Here’s what one expert thinks could happen with interest rates by early 2026.

Read more »

A man holds his head in his hands after seeing bad news on his laptop screen.
Share Market News

5 things to watch on the ASX 200 on Thursday

It looks set to be a tough session for Aussie investors today.

Read more »

The letters ETF with a man pointing at it.
Share Market News

3 fantastic ASX ETFs to buy with $1,000

These funds could be worth considering if you have money to invest in the share market.

Read more »

Businessman smiles with arms outstretched after receiving good news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a wonderful Wednesday session for investors today.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices.
Broker Notes

Macquarie tips 20% upside for this ASX 200 industrials stock

Let's see what the broker is saying about this stock following an update.

Read more »

A man with a wide, eager smile on his face holds up three fingers.
Gold

3 reasons this ASX 200 gold mining giant could soar higher into 2026

A leading expert forecasts more outperformance from this surging ASX 200 gold stock.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »