The NextDC Ltd (ASX: NXT) share price had a subdued start to the week.
The data centre operator's shares ended the day down 0.5% to $10.63.
This means the NextDC share price is down 17% since the start of the year.
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Is the NextDC share price in the buy zone?
The weakness in NextDC's shares in 2022 could be a buying opportunity according to the team at Morgans.
According to a note, in response to the company's half year results, the broker has retained its add rating and $14.64 price target on its shares.
Based on the current NextDC share price, this implies potential upside of 38% over the next 12 months.
What did the broker say?
Morgans was pleased with NextDC's performance during the first half, highlighting that its result was ahead of estimates. And while management has increased its capital expenditure (capex) guidance, the broker isn't concerned.
Its analysts commented: "NXT's 1H22 result was ahead of our forecasts and came with a small upgrade to FY22 guidance. Noteworthy was the ~8% upgrade to capex guidance which bodes well for future growth. NXT typically builds only what they have line of sight to leasing; including recently announced gen 4/5 regional/edge sites in smaller cities."
All in all, Morgans remains positive on the NextDC share price and notes that the company has exposure to structural tailwinds in an industry with high barriers to entry.
It explained: "We retain our Add recommendation and highlight that NXT remains our preferred pick given substantial structural growth, quality management, significant barrier to entry and, in our view, improving competitive advantage with regional/edge sites. We see a clear pathway for long-term growth, substantially higher EBITDA and material free cash flow, over the medium term."
