Down 45% in 8 months, why this ASX 200 tech stock 'now looks attractive'

Down 45% since March, this investing expert sees good value in the ASX 200 tech stock.

| More on:
Modern accountant woman in a light business suit in modern green office with documents and laptop.

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

Shares in the S&P/ASX 200 Index (ASX: XJO) tech stock Megaport Ltd (ASX: MP1) have lost a lot of ground over the past eight months, though the past week has delivered a marked turnaround.

On 15 March, the Megaport share price closed at $15.40.

In intraday trading today, shares are up 4.1%, changing hands for $8.43 apiece.

While the ASX 200 tech stock has been up an impressive 24% since the market closed on 5 November, shares have remained down 45% in eight months.

And this could offer investors an opportune long-term entry point.

Time to buy this beaten-down ASX 200 tech stock?

Medallion Financial Group's Philippe Bui has a buy rating on the ASX 200 tech stock (courtesy of The Bull).

"Megaport provides network-as-a-service solutions,' he explained.

"After a meteoric fall from grace caused by high expectations and muted fiscal year 2025 guidance, Megaport's share price now looks attractive," Bui said.

He continued:

The shares have fallen from $15.39 on March 14 to trade at $7.22 on November 7. The stock is now trading on its lowest revenue multiple in some time. We feel comfortable about buying the stock.

If the company can continue to grow earnings and revenue, the share price should follow. The company generated total revenue of $195.3 million in fiscal year 2024, up 28% on the prior corresponding period.

The ASX 200 stock has gained 16.8% since the figure Bui quotes from 7 November. But if Megaport can indeed deliver ongoing earnings and revenue growth, and keeping in mind that shares have been down 45% since mid-March, the stock could indeed continue to run higher from here.

What's been happening with Megaport?

Megaport's network of more than 113 data centre operators enables businesses to deploy private point-to-point connectivity between any of the locations on its global network infrastructure.

The ASX 200 tech stock's connections to major cloud service providers include companies like Microsoft Corp (NASDAQ: MSFT) and Google Cloud Platform, the domain of Alphabet Inc (NASDAQ: GOOG).

The company has been a beneficiary of the ongoing artificial intelligence (AI) revolution. But the Megaport share price tumbled 21% on 22 August when the company released the "muted fiscal year 2025 guidance" Medallion Financial's Bui mentioned above, along with its full FY 2024 results.

For FY 2024, Megaport reported revenue of $195.3 million, up 28% from FY 2023. And earnings before interest, taxes, depreciation and amortisation (EBITDA) were up 182% to $57.1 million.

As for FY 2025, the ASX 200 tech stock forecasts revenue will come in between $214 million and $222 million, with forecast EBITDA of $57 million to $65 million.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bernd Struben 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 Alphabet, Megaport, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet and Microsoft. 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

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Technology Shares

Why are investors fighting to buy this speculative ASX stock today?

What is getting investors excited today? Let's find out.

Read more »

Two men laughing while bouncing on bouncy balls
Technology Shares

Top broker says ASX 300 tech stock has 18% upside after sell-off

ASX 300 investors overreacted in punishing the high flying tech stock yesterday, this top broker says.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Earnings Results

Xero share price rockets to record high on explosive half-year growth

The tech star delivered another impressive half year results this morning.

Read more »

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

These ASX 200 tech stocks just crashed! Is this a no-brainer buying opportunity?

Bell Potter thinks these tech stocks could be great options following declines this week.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Technology Shares

Why is this ASX tech stock crashing 27% today?

Why are investors hitting the sell button? Let's find out.

Read more »

Man looks confused as he works at his laptop. watching the Magnis share price movements
Technology Shares

WiseTech share price in spotlight again as class action mounts

The headlines continue rolling in.

Read more »

Unsure man analysing data on laptop.
Earnings Results

ASX 200 tech stock sees red as investors punish Q3 results

Investors continue digesting the numbers.

Read more »

Two brokers analysing stocks.
Broker Notes

Don't miss these changes to broker ratings on ASX shares

The verdicts are in.

Read more »