Financial news wires are reporting that some of Australia's leading investment research analysts at Macquarie Group Ltd (ASX: MQG) have slapped an "outperform" rating and $5.30 price target on Vocus Group Ltd (ASX: VOC) stock.
Macquarie has a strong reputation for high-quality research that is well regarded in part due to the fact it is able to attract the best talent via huge salaries and because its scale gives it the resources to conduct high-quality fundamental research.
Vocus stock has responded to Macquarie's verdict that it's significantly undervalued by lifting 6% to $4.21 in morning trade, although that's still 20% below Mac Bank's price target for a tech business that is melding together a tech infrastructure network for Australia which could spit off mountains of cash over the next 10 years.
Vocus is also one of the most heavily shorted shares on the ASX with around 11% of its outstanding scrip shorted according to the latest data as some in the market doubt whether it will be able to meet guidance for financial year 2017 underlying EBITDA in the range of $430 million to $450 million.
This guidance was issued as recently as November 29 and given that this is the kind of (fixed-term, subscription-driven) business that should have a good read on short-term forward cash flows I expect management should deliver on guidance.
Admittedly the guidance is skewed to a stronger second half and the delivery of cost savings, with plenty of potential for further hiccups, although I agree with Macquarie that the stock looks cheap at $4.20 given the valuation and long-term outlook.
Another business I would look to own in similar space given its attractive valuation is TPG Telecom Ltd (ASX: TPM). It is probably higher quality and lower risk due to its founder-led nature, but that's reflected in a slightly more expensive valuation at $6.42.
Either way, I cannot see two better buying opportunities on the ASX right now for investors looking to put some cash to work.
