The S&P/ASX 200 Index (ASX: XJO) index may have crashed lower today, but that hasn't stopped the NEXTDC Ltd (ASX: NXT) share price from pushing higher.
In afternoon trade the data centre operator's shares are up over 2% to $9.07.
This latest gain means that NEXTDC's shares have climbed a remarkable 39% higher in 2020 despite the coronavirus pandemic.
Why is the NEXTDC share price pushing higher today?
Investors have been buying the company's shares today after it once again demonstrated how business is booming despite the current crisis.
Hot on the heels of an update at the start of April which revealed that demand in Sydney was exceptionally strong, this morning the company announced a major customer contract win in the Melbourne market.
According to the release, contracted commitments at its Victorian data centre facilities have now increased by approximately 6MW to more than 27MW since the start of March. This means that contracted customer commitments plus expansion options at its Victorian data centres are now approximately 60MW.
In light of this, NEXTDC has advised that it will bring forward 3MW of incremental capacity in the fourth stage of construction. This will increase the M2 data centre total capacity to 25MW and total Victorian capacity to 40MW.
As a result, its capital expenditure guidance for FY 2020 has been increased to a range of $340 million to $380 million. This compares to its previous guidance of $320 million to $340 million.
Delivering on its word.
NEXTDC'S Chief Executive Officer, Craig Scroggie, commented: "This announcement further accelerates the exponential growth of NEXTDC's Victorian operations. We advised the market at the time of our recent capital raising, that the Company's sales pipeline was very strong with expectations of material customer contract wins in the near term. We are very pleased to have now locked in further material commitments against these expectations."
This just goes to show how the company's investments over the last few years are starting to bear fruit now. Pleasingly, management expects this trend to continue.
"The demand for our data centre services continues to accelerate and requires discipline and patience as the nexus between hyperscale capacity planning, site development, infrastructure deployment and revenue recognition can, in practice, be up to 2-3 years. This reflects the nature of NEXTDC's digital infrastructure business model, which continues to build long term value through contracted capacity and tangible asset backing," Mr Scroggie concluded.
Is it too late to invest?
NEXTDC has been a very strong performer in 2020, but I wouldn't let that put you off investing. I remain confident that it is one of the best buy and hold options on the market.
This is due to its world class data centres which are in key locations across the country and the increasing demand (as seen above) for them. This demand is only going to grow over the next decade as more processes move to the cloud and data consumption explodes with 5G internet.
In a similar vein, investors might want to look at Megaport Ltd (ASX: MP1). I believe the same tailwinds are positioning it for very strong growth over the next decade.
