Shares in Megaport Ltd (ASX: MP1) are charging higher in afternoon trade and now sit 7.8% up at $14.67 apiece.
Investors are piling into Megaport as momentum spills over from the tech player's half-yearly results released yesterday.
Now analysts have chimed in with their opinions on Megaport's results and the outlook for the share price in 2022.
What are analysts saying about Megaport?
Even though its half-year results were solid, analysts at Jefferies reckon Megaport might still struggle to hit its break even point this year.
Profit after direct costs is up almost 70% year on year to $30.9 million. Revenue is up 42% to $52 million. But the margins on these results isn't sufficient for Megaport to break even on EBITDA in FY22. The broker says Megaport has to generate a gross profit margin of about 74% on 2H FY22 revenue to break even. And it doesn't think it can get there.
In a note, Jefferies retains its neutral stance on Megaport and cuts its share price valuation by more than 3% to $15.10.
Meanwhile, analysts at Macquarie are heavily bullish on Megaport. It's their top pick in the Australian tech universe.
In a note, the broker discussed the ASX tech sector and says it is shifting focus to more defensible names. It notes that Megaport's margin run rate surpassed its revenue growth for the quarter, which boosted earnings.
Macquarie analysts are attracted to the company's virtual-edge connectivity pipeline. They say this could potentially provide a stronger growth stream for Megaport than its cloud router segment. It lifted its target on the Megaport share price by 5% to $21 and urged clients to buy with an outperform rating.
JP Morgan and Morgans reduced their share price targets by 3% and 12% respectively after Megaport's update.
Megaport share price snapshot
In the past 12 months, the Megaport share price gained 3.3%. The S&P/ASX 200 Index (ASX: XJO) gained 6%.
Year-to-date, Megaport is down 23.4% while the broader index is down 4.2%.
