Up 79% this year, is the NextDC (ASX:NXT) share price the next Afterpay (ASX:APT)?

The Nextdc Ltd (ASX: NXT) share price has rocketed higher in 2020 but is it poised to become the next Afterpay Ltd (ASX: APT)?

| More on:
Graphic illustration of buy now pay later technology overlaid on blurred photo of businessman on tablet

Image source: Getty Images

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 one of the top performers in the S&P/ASX 200 Index (ASX: XJO) this year.

The ASX tech share has rocketed 78.6% higher this year to outpace many of its tech rivals. Impressively, it has also maintained its value despite a broader tech sell-off.

So, is the NextDC share price really good value right now and will it be the next Afterpay Ltd (ASX: APT)?

Why the NextDC share price has further to run

I think the current market presents plenty of buying opportunities and the NextDC share price could be one of them. Generally, markets are pretty good at pricing in expected future growth or earnings.

However, the coronavirus pandemic has thrown a real spanner in the works. I think that uncertainty could mean a bet on future economic growth in particular industries can pay dividends for investors.

Afterpay's success has been built on explosive growth and an ability to capture significant market share. I see some similarities with NextDC's strong data centre growth and strong market position.

In terms of industry conditions, I think things are looking up for the NextDC share price. A shift towards remote working and a push into regional Australia could boost demand for data storage and security services.

In my view, NextDC is in the box seat to capitalise with extensive data centre capabilities across Australia. 

The Afterpay share price growth in recent years has been astronomical. Some may argue it's unwarranted for a company that is yet to turn a profit. However, I think a strong growth outlook is something that investors are looking for in the current market.

If it's growth you're after, I think the NextDC share price is worth a look. The group hit the top end of its guidance range in its FY20 results with a 14% increase in revenue to $205.2 million.

NextDC also grew its contracted utilisation by 33% to 70 megawatts with customer numbers surging 15% to 1,364 in FY20.

Strong capital expenditure says to me that management is pushing for further growth. That could be good news as NextDC continues to carve out a significant market niche for itself.

Foolish takeaway

It's hard to say if the NextDC share price will be the next Afterpay. Despite surging in 2020, there is plenty of work left to do before it is considered in the same vein of ASX growth shares.

However, the technical environment looks good and NextDC is backing it up with strong numbers. That to me says that the NextDC share price should be on any tech investor's watchlist for 2021.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors regained some confidence on the stock market today.

Read more »

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

Why Baby Bunting, Bellevue Gold, Cettire, and New Hope shares are rising today

These ASX shares are having a good session. But why are investors buying their shares?

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Gainers

Here are the top 10 ASX 200 shares today

It was a shaky, but positive start to the trading week for ASX shares today.

Read more »

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Share Gainers

Why Bannerman Energy, Cettire, TechnologyOne, and Zip shares are charging higher

These ASX shares are having a great start to the week. But why?

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
Share Gainers

If I'd put $5,000 into Zip shares on 9 October, here's what I'd have now!

The stars have been aligning for Zip shares.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was an awful end to the trading week for ASX investors this Friday.

Read more »

A beautiful woman holds up one finger with one hand and has her hand on her waist with the other as she smiles widely as though she is very pleased about something.
Share Gainers

Why Beach, Clinuvel, Deep Yellow, and EML shares are charging higher today

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

Read more »

Man smiling at a laptop because of a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a fairly miserable day on the share market this Thursday.

Read more »