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Nextdc Ltd shares tipped to reach $7

The Nextdc Ltd (ASX: NXT) share price has had a positive start to the week.

In morning trade the data centre operator’s shares are up 1.5% to $5.82 and are rapidly closing in on their 52-week high of $6.18.

This latest gain means that NEXTDC’s shares are now up a whopping 83% since this time last year.

Is it too late to invest?

Despite its shares trading on a sky-high earnings multiple, I don’t believe for a second that it is too late to invest in NEXTDC’s shares.

Thanks to the seismic shift to the cloud, I think that the company is positioned perfectly to deliver significant earnings growth over the next decade which more than justifies today’s premium.

I’m not alone in thinking this, it seems.

According to a note out of Citi this morning, the broker has retained its conviction buy rating and lifted the price target on NEXTDC’s shares to a lofty $7.02. This price target implies potential upside of 20% over the next 12 months based on the current share price.

Citi’s analysts have made the move after finding that demand drivers for data centres continue to be robust.

Furthermore, following a spot of weakness in its share price over the last month or so, the broker believes that a buying opportunity has arisen for investors that missed out first time around.

Should you invest?

While it would certainly be a high risk investment due to the multiples its shares currently trade on, I still believe that an investment in NEXTDC provides investors with a compelling risk/reward.

So much so I think it would have to be up there with the likes of Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) as one of the best shares to buy in the information technology sector today.

As well as NEXTDC, I'm tipping these growth shares to smash the market in 2018.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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