Analysts are feeling bullish about the S&P/ASX 200 Index (ASX: XJO) stock Nextdc Ltd (ASX: NXT), partly because of its AI exposure.
Nextdc describes itself as Asia's most innovative data centre-as-a-service provider. It's "building the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise and government".
The data centre ASX 200 stock recently gave a positive contracted utilisation update, which analysts liked the look of.
Positive update recap
That update noted that after customer wins, the company's contracted utilisation has increased by 23.6MW, or 16%, since 31 December 2023 to 172.6MW.
Nextdc's NSW and ACT data centre region has reportedly benefited the most from the increased contracted utilisation and is now at 20% of total planned capacity.
Revenue recognition for a majority of the new customer contract wins is expected to commence progressively during FY27 after the completion and commissioning of additional data halls.
As a result of these customer contract wins, the company's forward order book now stands at a record level of 86.6MW.
Why are analysts bullish on the ASX 200 stock?
According to reporting by The Australian, Macquarie has raised its price target on Nextdc shares to $21.10.
A price target is where the broker sees the share price trading in 12 months from the time of the note.
Therefore, Macquarie is suggesting the Nextdc share price could rise by more than 20% in the next year. If true, that would likely be a market-beating performance.
Goldman Sachs is another financial institution that is positive on the company, as reported by my colleague James Mickleboro. Goldman Sachs recently said:
We are particularly positive on NXT and are Buy rated given the rapid growth in cloud adoption, which has been supported by the continued evolution of the enterprise telecommunications market, and the significant demand by both public and private investors for digital infrastructure assets. We believe the company has a compelling growth profile and a proven and profitable business model, noting it trades on a growth-adjusted discount vs. peers, which we view as unjustified. Key risks to our view include: (1) Increased competition; (2) Timing of contracts; (3) Customer concentration; and (4) Execution risk on further expansions.
Analyst estimates
Goldman Sachs is currently forecasting that Nextdc made $402 million in revenue and $194.7 million of earnings before interest, tax, depreciation and amortisation (EBITDA) in FY24. In FY25, Nextdc is forecast by Goldman Sachs to generate $438 million in revenue and $225.3 million in EBITDA.
UBS is also optimistic about the data centre ASX 200 stock, with a buy rating and a price target of $20.10. The broker is even more optimistic about Nextdc's future, with projections of $411 million of revenue for FY24 and $450 million for FY25. Nextdc isn't expected to make a positive net profit until FY28, but revenue is expected to keep rising at a double-digit rate in the next few years.
