Are Megaport (ASX:MP1) shares a buy after smashing earnings? See what these brokers say

See what these leading brokers have to say about Megaport's earnings and share price outlook.

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Key points

  • Investors are piling into Megaport today with the share price up more than 7%
  • Momentum is spilling over from the tech player's half-yearly results released yesterday 
  • Analysts have released notes with mixed opinions on the company's outlook

Shares in Megaport Ltd (ASX: MP1) are charging higher in afternoon trade and now sit 7.8% up at $14.67 apiece.

Investors are piling into Megaport as momentum spills over from the tech player's half-yearly results released yesterday.

Now analysts have chimed in with their opinions on Megaport's results and the outlook for the share price in 2022.

What are analysts saying about Megaport?

Even though its half-year results were solid, analysts at Jefferies reckon Megaport might still struggle to hit its break even point this year.

Profit after direct costs is up almost 70% year on year to $30.9 million. Revenue is up 42% to $52 million. But the margins on these results isn't sufficient for Megaport to break even on EBITDA in FY22. The broker says Megaport has to generate a gross profit margin of about 74% on 2H FY22 revenue to break even. And it doesn't think it can get there.

In a note, Jefferies retains its neutral stance on Megaport and cuts its share price valuation by more than 3% to $15.10.

Meanwhile, analysts at Macquarie are heavily bullish on Megaport. It's their top pick in the Australian tech universe.

In a note, the broker discussed the ASX tech sector and says it is shifting focus to more defensible names. It notes that Megaport's margin run rate surpassed its revenue growth for the quarter, which boosted earnings.

Macquarie analysts are attracted to the company's virtual-edge connectivity pipeline. They say this could potentially provide a stronger growth stream for Megaport than its cloud router segment. It lifted its target on the Megaport share price by 5% to $21 and urged clients to buy with an outperform rating.

JP Morgan and Morgans reduced their share price targets by 3% and 12% respectively after Megaport's update.

Megaport share price snapshot

In the past 12 months, the Megaport share price gained 3.3%. The S&P/ASX 200 Index (ASX: XJO) gained 6%.

Year-to-date, Megaport is down 23.4% while the broader index is down 4.2%.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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