Guess which ASX 200 tech stock could rise almost 40%

Goldman Sachs thinks that big returns could be coming for buyers of this stock.

| More on:
Man drawing an upward line on a bar graph 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 ended last week on a very disappointing note.

The ASX 200 tech stock finished the session 9.5% lower at $7.57.

Investors were selling the network as a service provider's shares after it only reaffirmed its guidance for FY 2025 at its annual general meeting.

It seems that the market was expecting an upgrade or at least strong commentary on its FY 2026 outlook. However, management advised that it continues to expect FY 2025 revenue of $214 million to $222 million. This represents a 9.6% to 13.7% year-on-year increase. EBITDA is still expected to be between $57 million and $65 million, which is flat to 14% higher year over year.

And looking to next year, management said that "early trends are indicative of a continuation of this revenue growth trajectory into FY26." This is softer growth than the market was expecting.

Is this ASX 200 tech stock a buy?

Analysts at Goldman Sachs were a touch disappointed with the update and had been expecting Megaport's investments to underpin an acceleration in its growth in FY 2026. The broker said:

Megaport reiterated its FY25 revenue and EBITDA guidance, but noted that it believes FY26 revenue growth will be largely consistent with the trends seen in FY25 (i.e. implies +10-14% rev growth vs GSe/VAe prior +15%). Despite significant investment in product and GTM (with ongoing key GTM hires being made in Q1 FY25, limiting margin expansion in FY26) MP1 is not yet seeing or expecting any acceleration in revenue growth – which we attribute to ongoing backbook pricing issues (i.e. backbook pricing is 2.5-3.0X market pricing, with pricing compression from these customers as they upgrade services offsetting the benefit of new customer growth).

And while this has led to the broker revising its estimates to reflect management's guidance and cutting its valuation accordingly, it still thinks investors should be snapping up the ASX 200 tech stock right now. It adds:

We revise our MP1 FY26 revenue growth to now be consistent with FY25 (+12%), while factoring in greater hiring activity through FY25 which drives our FY26 EBITDA -15%. Our 12m TP is -13% to A$10.40 given lower earnings, offset by a higher multiple (27X, from 26X) given peer re-rating.

As you can see above, Goldman has a buy rating and new price target of $10.40 on Megaport's shares. Based on its current share price of $7.57, this implies potential upside of 37% for investors over the next 12 months.

This buy rating is supported by Goldman's view that the ASX 200 tech stock "will benefit from strong structural tailwinds from the adoption of public cloud including multi-cloud usage and the transition towards NaaS technologies."

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has positions in Megaport. 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

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

Happy work colleagues give each other a fist pump.
Technology Shares

Guess which ASX 200 technology stock has outperformed Nvidia over the past 5 years?

This company has been nothing short of impressive.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Technology Shares

Why Goldman Sachs rates this ASX tech share as a top buy

Let's see why the broker rates this stock highly right now.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

WiseTech shares have surged 34% since April. Is it too late to buy?

Can WiseTech shares keep charging higher? Here’s what this investing expert expects.

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Technology Shares

Up 87% in 12 months: Why this ASX tech share is still a top buy

This technology business still has loads of potential, according to a fund manager.

Read more »

a group of three cybersecurity experts stand with satisfied looks on their faces with one holding a laptop computer while he group stands in front of a large bank of computers and electronic equipment.
Technology Shares

2 ASX 200 tech stocks Morgans rates as buys

The leading broker has named a couple of shares to buy right now.

Read more »