Macquarie Technology Group Ltd (ASX: MAQ) shares have been strong performers in 2023.
Since the start of the year, the ASX tech share has charged 13% higher.
This is almost triple the return of the ASX 200 index over the same period.
Is it too late to buy this ASX tech share?
The good news is that it isn't too late to buy this ASX tech share according to one leading broker.
According to a note out of Goldman Sachs from this morning, its analysts have reiterated their conviction buy rating with an improved price target of $77.20.
Based on the current Macquarie Technology share price of $66.95, this would mean a potential upside of 15% for investors.
Why is the broker positive?
Goldman is bullish on this ASX tech share due to its exposure to the cloud computing boom. It believes a recent equity raising to support its data centre business is a positive for a number of reasons. The broker explains:
In our view, MAQ's upsized $160mn equity raising was a positive development for the following reasons: (1) sign of strength in the cloud demand outlook, with proceeds earmarked for further data centre expansion (including IC3 Super West); (2) stock liquidity, which was a key pushback from investors based on our conversations since initiation in Nov-22 (co-founders' stake diluted from 52% to c.46% on our calculation); and (3) balance sheet funding for expansion at IC3 Super West (or possibly other DC developments), helping to secure MAQ's growth outlook and reduce peak leverage (we estimate 1.5x in FY25).
Its analysts also highlight that Macquarie Technology shares have underperformed rival NextDC Ltd (ASX: NXT) materially year to date. This leaves them trading at a sharp discount to NextDC despite having similarly attractive characteristics and a strong earnings growth outlook. It concludes:
MAQ has underperformed key peer NXT YTD (+13% vs +46% NXT) and trades at a SOTP-implied discount both to NXT in Data Centres, but also to DTL in Cloud Services & Government (12.5x CS&G NTM EV/EBITDA vs 16.5x DTL), despite possessing attractive characteristics in both businesses including strong margins, returns and recurring revenue. At 15x NTM EV/EBITDA (group), against an +18% FY22-25E EBITDA CAGR and with +15% upside to our revised $77.20/share TP (vs $75.30/share prior), we reiterate Buy (on CL).
