Down 33% in a month, is the Megaport share price in ‘value’ territory?

Calling a value play might be tricky in this current market.

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Key points

  • Megaport shares have been beaten down in 2022
  • Some analysts are still constructive on the share and reckon there is long-term value yet to be realised
  • In the last 12 months the Megaport share price has fallen around 74%

The Megaport Ltd (ASX: MP1) share price has sunk another 2.17% on Wednesday. At the time of writing, it’s sitting at $4.96 on no news.

This brings Megaport’s losses to 33% for the month, or 74% this year to date.

In wider market moves, the S&P/ASX All Technology Index (ASX: XTX) has crept 50 basis points lower today. It too is down, 39% this year to date.

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Is the Megaport share price in value territory?

Megaport shares are being punished in 2022. Now, with the market sell-off, losses have extended and the share is deep in the red.

Despite the pressure, analysts at Goldman Sachs remain constructive on its outlook and price Megaport at $13.10 per share.

At the current market price of $4.96, some might suggest it is trading at a deep discount to Goldman’s price objective.

Structural tailwinds in the cloud-usage and networking-as-a-service (NaaS) space are key drivers of Megaport’s growth, Goldman says.

The total market could reach $129 billion for these areas, the broker reckons. Certainly optimistic projections that could bode well for Megaport.

Further, whilst the market has been unkind to Megaport, if it is considered a value share, this could play in well to the case.

That’s because value stocks are likely to outperform growth after a slumped period, according to Cliff Asness, CIO at AQR Capital.

Speaking to Goldman Sachs’ June macroeconomic research paper Top of Mind, Asness said:

Looking ahead, I’m confident that Value can continue to outperform over a medium-term, say, three year, horizon precisely because the valuation spread between Value and Growth remains incredibly stretched, which would represent a stark break from the post-GFC cycle where Value delivered somewhere between subpar and dismal returns.

Irrespective, the Megaport share price has a long way to run to reach its former closing high of $21.88 reached on 17 November 2021.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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