Could an ‘immense’ opportunity mean the Megaport share price is now a buy?

Is Megaport a tech share to buy due to its immense growth opportunity?

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Key points

  • Megaport shares have been hammered in 2022 and are down 72% year to date
  • The market's aversion to loss-making tech companies has been largely to blame
  • Goldman Sachs remains positive and highlights the company's 'immense' growth opportunity

Due to the market’s sudden aversion to loss-making tech companies, you won’t be surprised to learn that the Megaport Ltd (ASX: MP1) share price has been hammered in 2022.

Since the start of the year, the leading cloud connectivity and networking solutions provider’s shares have lost a disappointing 72% of their value.

Is the Megaport share price weakness a buying opportunity?

While the decline in the Megaport share price is disappointing for shareholders, it could be a buying opportunity for others. In fact, if the team at Goldman Sachs are on the money, there could be some huge gains ahead for investors.

According to a recent note, its analysts have a buy rating and $13.10 price target on the company’s shares.

Based on the current Megaport share price of $5.41, this implies potential upside of 140% for investors over the next 12 months.

Why is Goldman bullish?

Goldman is bullish on the Megaport share price due to the company’s first-mover advantage in an industry benefiting from long term structural tailwinds. These are the adoption of public cloud (and multi-cloud usage) and the transition towards Networking as a Service (NaaS).

The broker highlights that the latter is being driven by the increased prevalence of hybrid working and cloud-based applications. These are putting strain on legacy network designs and impacting performance. All in all, the broker feels this is providing Megaport with an “immense” growth opportunity.

Goldman explained:

MP1 is benefiting from its first-mover advantage, and two structural tailwinds that accelerated through covid-19, including: (1) The adoption of public cloud & multi-cloud usage; and (2) The growth in Networking as a Service (NaaS).

The opportunity for further growth is immense (GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies).

Motley Fool contributor James Mickleboro 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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