Macquarie tips more than 20% upside for Megaport shares

This tech stock has Macquarie firmly in its corner.

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Key points

  • Megaport is set for a bright future with Macquarie tipping a 22% upside, highlighting the company's strategic acquisition of Latitude.sh, which provides dedicated server solutions and positions Megaport competitively against cloud providers.
  • The acquisition is expected to enhance Megaport's earnings with ARR, EBITDA margin, and EPS accretion, while its recent trading performance in FY 2026 further strengthens its market stance, aiming for an ARR of A$295 million.
  • Macquarie maintains an outperform rating and an $18.50 price target, banking on Megaport's strategic reinvestment in growth, expanding into software with edge computing, and improving margins for sustained long-term growth.

Megaport Ltd (ASX: MP1) shares could be undervalued at current levels.

That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which are feeling bullish on the growing network solutions company.

What is the broker saying?

Macquarie appears supportive of the company's plan to acquire Latitude.sh for US$150 million. It said:

Latitude.sh is the Megaport for Compute. It offers private, scalable, flexible, global CPU infrastructure. It is not cloud capacity. Cloud infra is multi-tenanted, meaning Hyperscalers share resources across multiple customers. Latitude sells dedicated servers (bare metal). High-egress customers often see bare metal infra saving ~85% on their Total Cost of Ownership (TCO) relative to cloud. This is particularly relevant for use cases like Blockchain nodes and industries such as Media (with streaming), SaaS, Finance and Healthcare (high-traffic applications).

These industries are the high-growth areas in MP1's recent Cloud Network Report, validating call commentary of existing customer demand. As MP1 expands its product portfolio, it can host these products on its newly acquired edge compute, similar to Cloudflare's model.

Furthermore, Macquarie highlights that the deal will be ARR, EBITDA margin, and earnings per share accretive. And while there is higher capital intensity, there will be higher returns in bare metal CPUs.

Outside this, Macquarie points out that Megaport is performing strongly so far in FY 2026. In fact, if it continues this way, it will outperform the market's expectations this year. It said:

Strong trading update (A$160m ARR & NRR expands to 109%). Megaport (MP1) is on track for MRE FY26 ARR of A$295m (VA: A $288m).

Major upside potential

According to the note, the broker has retained its outperform rating and $18.50 price target on Megaport's shares.

Based on its current share price of $15.13, this implies potential upside of 22% for investors over the next 12 months.

To put that into context, a $10,000 investment would be worth over $12,000 by this time next year if Macquarie is on the money with its recommendation.

Commenting on its outperform recommendation, the broker said:

Top-line is stabilised, with new customer logo growth a strong positive signal. Reinvestment in growth will drive top-line acceleration out of FY26. Product roadmap suggests MP1 will move more into software with edge compute, driving higher long-term margins. Retain Outperform.

Valuation: No change to our DCF-based TP of A$18.50. Catalysts: Partnership announcements, deal wins, product launches, AGM.

Motley Fool contributor James Mickleboro has positions in Megaport. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Megaport. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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