Macquarie Technology Group Ltd (ASX: MAQ) shares are having a strong session on Wednesday.
At the time of writing, the ASX tech stock is up 4% to $66.33.
This appears to have been driven by the release of a bullish broker note out of Macquarie Group Ltd (ASX: MQG) this morning.
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What is the broker saying about this ASX tech stock?
Macquarie is feeling very bullish about the telecommunication, cloud computing, cybersecurity and data centre services provider to corporate and government customers within Australia.
This is especially the case given its positive outlook and attractive valuation compared to peers. In respect to its outlook, the broker commented:
MAQ is well positioned to benefit from accelerating demand in Australia's data centre market, which Alvarez & Marsal forecasts to witness a 16% CAGR from 2024– 27e. It expects the hyperscale and AI segments to expand even faster, at ~20% and ~90% CAGRs, offering significant opportunities for established operators like MAQ, which already serves 2 of 3 global hyperscalers and 42% of government agencies.
This will be supported by the ASX tech stock's data centre capacity plans. It adds:
Data centre capacity set to expand ~10x. MAQ's strategy is to grow current installed capacity of 21MW to >215MW over the next decade driven by the 47MW IC3 SW and the recent land lot option to provide a further >150MW. Our data centre earnings accelerate from FY28e, with Phase 1 of IC3 SW to be completed Sep-26.
Attractive valuation
As mentioned above, Macquarie thinks that the technology company's shares are attractively priced at current levels and sees significant upside potential for investors.
According to the note, the broker has initiated coverage on the stock with an outperform rating and $97.30 price target. Based on its current share price, this implies potential upside of almost 50% for investors over the next 12 months.
Commenting on its recommendation, Macquarie said:
Initiate with Outperform. MAQ is trading on ~14x NTM EV/EBITDA, well below peers at 17-34x. As its data centre developments advance, we see scope for a material valuation re-rate; we forecast Data Centres will increase from ~35% to ~60% of group earnings over FY26-FY30e.
Valuation: $97.30 TP based on a blended DCF & EV/EBITDA val. Our $71.30 val for MAQ's existing businesses is underpinned by the current share price, with IC3 SW & future data centres providing material upside risk. Key catalysts. IC3 SW build &contract updates, land settlement for new campus, funding updates, industry news on large AI/hyperscale demand.
