The Megaport Ltd (ASX: MP1) share price is on course to end the week strongly.
In morning trade, the network as a service provider's shares are up 6% to $7.34.
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Why is this ASX 200 tech share racing higher?
The catalyst for the rise in the Megaport share price on Friday has been the release of a bullish broker note out of Morgans.
According to the note, the broker has upgraded the ASX 200 tech share to an add rating with a $9.00 price target.
Based on where its shares are currently trading, this implies potential upside of over 22% for investors over the next 12 months.
Why did the broker upgrade Megaport shares?
The broker made the move on the belief that the risk/reward on offer with Megaport shares is compelling now after a period of share price weakness.
Morgans also believes that the worst is over for ASX 200 tech shares and that valuations are fair again. And with global economic growth likely to struggle in the near term, it feels that investors could soon return to the tech sector. It explained:
In CY22 we had an underweight view on the technology sector. CY22 was brutal for technology and growth stocks. Inflation/interest rates were the main culprit. As we look into CY23 we think it's improbable interest rate rises will be anywhere near as dramatic as CY23 so the macro backdrop looks better for tech.
Valuations for quality tech are now back to 20 year / long run averages (fair value). Interest rates should normalise and, assuming this occurs, investors may reassess the fact that we are back into a no growth world. […] Quality tech can grow regardless of weak economic conditions. Profit growth should reignite interest in the tech sector once again and this profit growth should drive share price appreciation.
