The NextDC Ltd (ASX: NXT) share price is having a tough week.
Despite releasing a strong full year result, weakness in the tech sector has dragged the data centre operator's shares lower.
Is the NextDC share price weakness a buying opportunity?
According to a note out of Goldman Sachs, its analysts believe investors should be snapping up shares following recent weakness.
This morning its analysts have retained their conviction buy rating with an improved price target of $14.30.
Based on the current NextDC share price of $10.26, this implies potential upside of almost 40% for investors over the next 12 months.
What did the broker say?
Goldman was pleased with NextDC's "solid" result and was even happier with its guidance for FY 2023. The broker commented:
NXT reported a solid FY22 result, with revenue/EBITDA -1% vs. GSe, but within/above its upgraded guidance range. Positively FY23 Rev/EBITDA guidance for +19%/+15% growth was provided, which was +1% vs. Gse.
Its analysts were also pleased to see that NextDC demonstrated good pricing power with its services, which helped offset inflationary pressures. It explained:
Other Positives: (1) Pricing power evident, with strong realized yields & 5-7% price rises introduced given inflation/power; (2) High yielding Enterprise momentum across all regions, with +3MW contracted growth in FY22, at top end of historical targets; (3) M2 Expansion to 100MW (from 60).
All in all, this has led to Goldman making small upgrades to its earnings estimates and its valuation. It concludes:
We revise NXT FY23-24 EBITDA +2%/+0% given stronger yields, offset by higher costs. Our 12m TP is +1% to $14.30. Stay Buy (on CL) ahead of the acceleration in growth following S3/M3 openings and supply chain normalization.
