Megaport Ltd (ASX: MP1) shares ended last week on a very disappointing note.
The ASX 200 tech stock finished the session 9.5% lower at $7.57.
Investors were selling the network as a service provider's shares after it only reaffirmed its guidance for FY 2025 at its annual general meeting.
It seems that the market was expecting an upgrade or at least strong commentary on its FY 2026 outlook. However, management advised that it continues to expect FY 2025 revenue of $214 million to $222 million. This represents a 9.6% to 13.7% year-on-year increase. EBITDA is still expected to be between $57 million and $65 million, which is flat to 14% higher year over year.
And looking to next year, management said that "early trends are indicative of a continuation of this revenue growth trajectory into FY26." This is softer growth than the market was expecting.
Is this ASX 200 tech stock a buy?
Analysts at Goldman Sachs were a touch disappointed with the update and had been expecting Megaport's investments to underpin an acceleration in its growth in FY 2026. The broker said:
Megaport reiterated its FY25 revenue and EBITDA guidance, but noted that it believes FY26 revenue growth will be largely consistent with the trends seen in FY25 (i.e. implies +10-14% rev growth vs GSe/VAe prior +15%). Despite significant investment in product and GTM (with ongoing key GTM hires being made in Q1 FY25, limiting margin expansion in FY26) MP1 is not yet seeing or expecting any acceleration in revenue growth – which we attribute to ongoing backbook pricing issues (i.e. backbook pricing is 2.5-3.0X market pricing, with pricing compression from these customers as they upgrade services offsetting the benefit of new customer growth).
And while this has led to the broker revising its estimates to reflect management's guidance and cutting its valuation accordingly, it still thinks investors should be snapping up the ASX 200 tech stock right now. It adds:
We revise our MP1 FY26 revenue growth to now be consistent with FY25 (+12%), while factoring in greater hiring activity through FY25 which drives our FY26 EBITDA -15%. Our 12m TP is -13% to A$10.40 given lower earnings, offset by a higher multiple (27X, from 26X) given peer re-rating.
As you can see above, Goldman has a buy rating and new price target of $10.40 on Megaport's shares. Based on its current share price of $7.57, this implies potential upside of 37% for investors over the next 12 months.
This buy rating is supported by Goldman's view that the ASX 200 tech stock "will benefit from strong structural tailwinds from the adoption of public cloud including multi-cloud usage and the transition towards NaaS technologies."
