Why this broker sees a 30% upside in the Macquarie Telecom (ASX:MAQ) share price

This broker values Macquarie Telecom shares at over $100. Here’s why.

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The Macquarie Telecom Group Ltd. (ASX: MAQ) share price has been a top performer in 2021, up 45% year-to-date.

Macquarie Telecom’s outperformance has largely been attributed to a single-day jump in share price on 14 July, when the company announced plans to build a new data centre at the Macquarie Park Data Centre Campus. Its shares jumped 15.4% on the day of the announcement to $63.50.

The Macquarie Telecom share price continued to rally following the new data centre announcement, scoring an all-time high of $82.50 on 31 August.

From a fundamental perspective, the company has delivered sound growth with its FY21 full-year results reflecting a seventh consecutive year of EBITDA growth.

Looking ahead, the company said that it expects EBITDA to continue to grow in FY22, driven by its investments and performance in data centres, cloud services and government.

In an interview with Livewire, Investors Mutual’s Simon Conn and Montgomery Investment Management’s Roger Montgomery shared with investors companies that have a solid growth outlook.

Why there could be more upside to the Macquarie Telecom share price

Montgomery pitched Macquarie Telecom when asked to pick a company that is a “strong candidate for an earnings upgrade.”

“We think the market doesn’t appreciate how they make their money from selling their volume. They often sell a large part of their available power, if you like, at a lower price. But they can make just as much money – they can actually double their revenue and their EBITDA – from selling the last 10% of the volume at 10 times what they sold the original 90% for.”

“I don’t think that’s widely appreciated. So we’ve got valuation on the stock of over $100, and its recent weakness gives, I think, us and other people an opportunity to buy,” he added.

The Macquarie Telecom share price has been trading sideways since early August, around the mid $70 level.

Should you invest $1,000 in Macquarie Telecom right now?

Before you consider Macquarie Telecom, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Macquarie Telecom wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. 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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