Nextdc Ltd share price rockets on takeover rumours

The Nextdc Ltd (ASX: NXT) share price has been one of the best performers on the market this morning.

The data centre operator’s shares are up 9% to an all-time high of $6.26 at the time of writing. This means NEXTDC’s shares have more than doubled in value since this time last year.

Why are they storming higher today?

Although there was no news out of the company this morning, there appears to be a couple of catalysts for today’s sizeable gain.

The first is a broker note out of RBC Capital. That note reveals that the broker has retained its conviction buy rating and increased the price target on NEXTDC’s shares to $7.50. Even after today’s move higher this price target implies potential upside of almost 20% for its shares.

The other catalyst for today’s move could be speculation that it could be a takeover target.

According to the News Corp press, US private equity giant Blackstone is rumoured to be one of up to six parties that are interested in buying Asia Pacific Data Centre Group (ASX: AJD), which was spun-off from NEXTDC a few years ago. But the spending won’t stop there for at least one of these parties according to the report.

Blackstone, which missed out on buying rival data centre operator Metronode in November, is believed to interested in buying both Asia Pacific Data Centre Group and NEXTDC in what would be a blockbuster double purchase.

Should you invest?

While I think that NEXTDC is one of the best buy and hold investment options on the market at the moment, I would hold off an investment for the time being.

If a takeover bid does not materialise in the near future, I think there’s a danger that these recent gains could be reversed. If that happens then I would suggest investors snap up shares on the weakness with a view for holding them for the long term.

In the meantime these explosive growth shares could be worth buying in my opinion.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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