Key points
- Softening growth during the second quarter weighing on its shares
- Megaport shares also caught up in tech selloff
- Management positive on the future
The Megaport Ltd (ASX: MP1) share price is under pressure on Wednesday morning.
At the time of writing, the leading elastic interconnection services provider's shares are down 12% to $16.10.
Why is the Megaport share price falling?
Investors have been selling down the Megaport share price today amid broad weakness in the tech sector and the release of an underwhelming second quarter update. According to the release, Megaport reported a quarter on quarter increase of just $0.6 million or 7% in its monthly recurring revenue (MRR) to $9.2 million. This led to an 8% increase in second quarter revenue to $26.6 million.
Driving this was a 5% increase in customer numbers to 2,455, a 5% lift in total ports to 8,523, and a modest 2% rise in average revenue per port to $1.074. This was supported by the launch of the PartnerVantage portal, which allows indirect partners to resell Megaport services.
While no details were provided on Megaport's earnings during the period, it did reveal that its cash balance stood at $105 million at 31 December. This is down from $114 million since the end of September.
Judging by the Megaport share price performance today, its growth during the quarter doesn't appear to have been enough for the market. Particularly given the sky high multiples its shares trade on.
Management commentary
Megaport CEO Vincent English said:
In the second quarter, we continued to stay very focused on executing to achieve our targets and aligning the business for greater channel growth.
In addition to delivering the strongest second quarter for new customers and Ports, the team also delivered key new partnerships in the indirect channel and technology alliance space. Additionally, we launched VantageHub, a one-stop platform for indirect channel partners to manage their Megaport business.
Mr English remains positive on the future, saying:
We are well positioned to capture indirect channel opportunities coming into the second half of the financial year and beyond. Integration of InnovoEdge following the acquisition last August is well underway and we expect to showcase the capability for additional orchestration and automation for greater end-to-end control of network and IT resources in the next quarter.
