Why the Megaport (ASX:MP1) share price is on the rise

The purchase of InnovoEdge was for US $15 million, half cash and half scrips.

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The Megaport Ltd (ASX: MP1) share price is climbing on a day of overall falls. That’s after the company announced it had completed the purchase of InnovoEdge for US $15 million.

At the time of writing, shares in the software provider are trading for $17.02 – up 0.71%. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is 0.43% lower.

Let’s take a closer look at today’s news.

Megaport share price rises on latest purchase

Last week, Megaport confirmed it would be purchasing InnovoEdge. A company it described as providing “AI-powered multi-cloud and edge application orchestration”. The deal compromised US $7.5 million in cash and US $7.5 million worth of shares in Megaport. The scrip will be issued in 3 tranches over 3 years, subject to “the achievement of specified 1 product development and revenue milestones”.

At the time Megaport CEO, Vincent English said

The acquisition of InnovoEdge aligns well with that priority and will help us drive greater functionality across our leading Network as a Service platform. By integrating the InnovoStudio service with our portal and software defined network, we will provide customers and partners with greater visibility and control of networking, cloud, and service resources.

The Megaport share price rose on the news of the acquisition and is rising again on its completion.

Megaport FY21 results

Along with the announced purchase of InnovoEdge, Megaport also released its FY21 results.

For the previous financial year revenue was up 35% to about $78 million. As well, monthly recurring revenue (MRR) jumped 32% to $7.5 million and average revenue per port was slightly down to $978 per port. Overall, the company made a net loss of $55 million but had approximately $136 million cash on hand.

Megaport share price snapshot

Over the past 12 months, the Megaport share price has increased 29%. The ASX 200 increased at a marginally lower rate of 25%. Year-to-date, Megaport shares have overperformed the benchmark index 19.7% to 13.6%.

Given its current valuation, Megaport has a market capitalisation of about $2.7 billion.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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