Is the NEXTDC (ASX:NXT) share price in the buy zone before its FY 2021 results?

Should you be buying this data centre operator’s shares?

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The NEXTDC Ltd (ASX: NXT) share price will be on watch later this month when it releases its full year results.

Ahead of the results release, I thought I would look at what the market is expecting from the data centre operator.

What is expected from NEXTDC in FY 2021?

Another strong full year result is expected from NEXTDC in FY 2021. A note out of Goldman Sachs reveals that its analysts are forecasting:

  • Data Centre Revenue growth of 24% to $250 million. This compares to its guidance of $246 million to $251 million.
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 26% to A$132 million. This compares to its guidance of $130 million to $133 million.
  • A net loss after tax of $5 million.
  • Capital expenditure of $393 million.
  • Customers of 1,564, cross connects of 14,965,000, and contracted capacity of 75MW.

What else should investors look for?

Given how much growth is built into the NEXTDC share price, its outlook for FY 2022 will be of great importance.

Goldman Sachs is forecasting FY 2022 revenue of $298 million and EBITDA of $165 million. This is broadly in line with the market consensus estimate for the year ahead.

The broker has also pencilled in capital expenditure of $331 million. This includes $171 million on the S3 centre and $75 million on the M3 site.

Is the NEXTDC share price in the buy zone?

The team at Goldman Sachs remain very bullish on the NEXTDC share price.

At present they have a conviction buy rating and $14.80 price target on its shares. This implies potential upside of 12.5% over the next 12 months.

The broker commented: “We remain high-conviction on the growth profile ahead, forecasting +37MW contract wins across FY22-23E (=65% conversion of options). Combined with recent share price underperformance, this gives an attractive growth adjusted valuation. We reiterate our Buy (on CL) on NXT, the most compelling growth story in our coverage.”

Should you invest $1,000 in NEXTDC right now?

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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