Guess which exciting ASX 200 tech stock could rocket 50%+

Goldman Sachs thinks this company's shares could be seriously undervalued.

| More on:
Rocket powering up and symbolising a rising share price.

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

Megaport Ltd (ASX: MP1) shares have been having a tough time in recent weeks.

So much so, the ASX 200 tech stock is down 34% since 21 August.

While this is disappointing for shareholders, it could be a buying opportunity for the rest us.

That's the view of analysts at Goldman Sachs, which is tipping big returns from the network as a service provider's shares over the next 12 months.

What is the broker saying about this ASX 200 tech stock?

Goldman notes that Megaport's CEO, Michael Reid, and its CFO, Leticia Dorman, have appeared at the Communacopia + Technology Conference 2024.

It highlights that management discussed its growth prospects, artificial intelligence, and investment opportunities.

In respect to its growth prospects, Goldman points out that Megaport is benefiting from complex cloud environment and connectivity demands. It said:

Megaport considers itself the world's largest NaaS operator, and is benefiting from increasingly complex cloud environment and connectivity demands, while its product-led growth remains robust, supporting its positive net revenue retention and revenue tailwinds over the medium term.

Goldman also highlights that the ASX 200 stock stands to benefit from artificial intelligence driven demand for GPU as a service (GPUaaS). It explains:

Megaport is seeing a significant uptick in GPUaaS operators coming to market and driving demand for high levels of capacity and services within existing data centres. Latitude.sh was cited as an example of a GPU farm that is operating in 18+ Megaport locations, currently driving increased demand for MP1 connectivity.

Finally, the broker notes that the company is focused on growing profitably but sees opportunities to invest in its platform. It adds:

Megaport remains focused on profitable and efficient growth, and having built out its network, believes FY25 capex guidance of $27-30mn is reflective of its steady state. Megaport does see scope to continue investing in its core platform and go to market over time, but will stay within FY25 guidance guardrails. Management did indicate the benefits of being headquartered in Australia, allowing Megaport to attract and retain high-quality talent but pay 1/3 as much for their services compared to the SF bay area.

Big potential returns

According to the note, Goldman has responded to the presentation by retaining its buy rating and $12.00 price target on the ASX 200 tech stock.

Based on its current share price of $7.78, this implies potential upside of 54% for investors over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Megaport. 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 Scott Phillips.

More on Technology Shares

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

Is it too late to buy DroneShield shares?

This high-flying stock is up 90% since this time last month. Where next? Let's find out.

Read more »