Top broker tips NEXTDC shares to hit $7.70

The NEXTDC Ltd (ASX:NXT) share price could be charging a lot higher from here according to one top broker…

| More on:
a woman

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

The NEXTDC Ltd (ASX: NXT) share price has been a solid performer on Friday.

In morning trade the data centre operator's shares are up over 1.5% to $6.77.

Why is the NEXTDC share price pushing higher?

Investors have been buying NEXTDC's shares today after it was the subject of a positive broker note out of Goldman Sachs.

According to the note, Goldman Sachs has retained its buy rating and lifted the price target on its shares to $7.70.

This price target implies potential upside of ~14% over the next 12 months from its current share price.

Why is Goldman Sachs bullish on NEXTDC?

Goldman lifted its price target on NEXTDC's shares following media reports that it had won a ~$35 million two-year data centre contract with the Bureau of Meteorology (BoM).

The broker believes this contract is in Melbourne and is estimated to be 3.5MW in size.

Based on NEXTDC's M1 pricing of $4.39 million per MW, Goldman expects it to contribute $15 million in revenue and $11 million in EBITDA in FY 2021 when at its full run-rate. It also expects it to have a positive impact on its FY 2020 results, though it is uncertain just how much at this stage.

Its analysts believe this is a big positive for NEXTDC. Not only because of the financial impact, but also as it "addresses a key investor concern around the lack of recent contract wins, particularly in Melbourne."

Goldman concluded: "[We] Stay Buy on NXT, given (1) We expect earnings growth to accelerate into FY21, largely underpinned by existing contracted MW in Sydney; (2) NXT is delivering an improving cash return on investment; and (3) we remain positively disposed to the secular tailwinds which will drive NXT earnings from FY22 and beyond – with our global teams forecasting aggregate cloud revenue/capex to grow +46%/+17% in CY19."

Elsewhere on the market today, fellow tech share Nearmap Ltd (ASX: NEA) has also been given a buy rating. Morgan Stanley has an overweight rating and $4.20 price target on its shares following its AGM update.

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended Nearmap 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 Scott Phillips.

More on Share Gainers

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »

Two happy scientists analysing test results.
Healthcare Shares

Mesoblast share price rockets 36% on breaking FDA news

ASX investors are sending the Mesoblast share price soaring following promising FDA news.

Read more »