Is it too late to buy NEXTDC Ltd shares?

In morning trade the NEXTDC Ltd (ASX: NXT) share price is on course for a solid finish to the week.

At the time of writing the data centre operator’s shares are up over 2.5% to $6.82. This brings NEXTDC’s 12-month return to an impressive 60%.

Is it too late to buy NEXTDC’s shares?

While its shares are trading at a significant premium to the market average, I still see a lot of value in them for patient buy and hold investors.

Especially given the incredible growth of the cloud computing market. This was highlighted overnight when global behemoth Amazon reported its quarterly results which smashed the market’s expectations.

One of the key catalysts of this growth was the performance of its cloud business. During the first quarter Amazon’s cloud business delivered a 49% increase in segment revenue compared to the prior corresponding period to US$5.44 billion.

I believe this could be an indication that NEXTDC is experiencing strong demand for its services, especially considering it counts Amazon Web Services as a customer in Australia.

But it wasn’t just Amazon that has seen cloud revenues explode. Microsoft also released its quarterly earnings overnight and reported a massive 93% increase in revenue for its Azure cloud business.

With demand for cloud services growing strongly, I think NEXTDC’s recent $281 million capital raising was a smart move.

The capital raising was done in order to fund the purchase of three new commercial property sites for future data centre developments in Sydney, Melbourne, and Perth, and mitigates the risks of the company running out of new capacity in its key markets.

I’m not the only one that thinks that NEXTDC is in the buy zone. Broker notes out of Morgan Stanley and Citi last week gave its shares the equivalent of buy ratings and lofty price targets of $9.20 and $8.40, respectively.

I agree with these two brokers and would class NEXTDC as a buy ahead of Macquarie Telecom Group Ltd. (ASX: MAQ).

As well as NEXTDC, I think these growth shares would be great buy and hold investment options.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia has recommended Amazon. 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 Scott Phillips.

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