The share price of this ASX tech stock has taken a notable hit in recent weeks. In the last month, Megaport Ltd (ASX: MP1) has lost 27% of its value, with a 10.5% decline in the last 5 trading days alone.
The recent tumble is erasing a significant portion of Megaport's strong 2025 rally, although the ASX tech stock is still up 74% this year.
It's a stark contrast with the performance of ASX 200 tech shares in general. By comparison, the S&P/ASX 200 Information Technology Index (ASX: XIJ) is down 20% in the past 12 months.
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Streamlining cloud connectivity
Regardless of the current volatility, the ASX tech stock remains one of the stand-out tech companies this year. Megaport is a network-as-a-service solutions provider that streamlines cloud connectivity for businesses.
Rather than investing in costly physical infrastructure or committing to lengthy telecommunications contracts, organisations can use Megaport's software to establish private, secure data connections within minutes.
Sticky revenue
Megaport's platform allows customers to connect to around 860 data centres worldwide. In the first half of FY25 alone, the ASX tech stock added another 82 data centres and four new internet exchange locations. This approach offers greater cost efficiency, speed, and flexibility compared to conventional networking methods.
The ASX 200 tech stock has been experiencing swift growth. Its customer base is increasing quickly, and it is broadening its presence around the world. This has helped Megaport underpin a strong annual recurring revenue (ARR) growth. For example, in FY25, it reported a 20% increase in ARR to $243.8 million.
Fresh scrutiny over acquisition
Despite a solid underlying business, the ASX stock price has been under pressure in recent weeks. At the centre of recent volatility is the acquisition of Latitude.sh.
When it announced the takeover, the ASX 200 stock highlighted that Latitude.sh enables the company to extend its offering beyond network connectivity. It would be capable of marrying high-performance computing with Megaport's existing global private networking.
That pitch clearly excited investors at the time. Now, it seems that negative sentiment dominates and puts pressure on the price of the ASX tech stock. Investors don't seem to be happy that the acquisition was largely financed by a capital raise.
Megaport completed a fully underwritten $200 million institutional placement issuing roughly 14 million new shares. For many shareholders, that dilution paired with uncertainty over integration and execution has created unease, contributing to the recent sell-off.
What do analysts think?
While the long-term potential remains attractive, there are also concerns about Megaport's near-term growth outlook. Its FY26 guidance appears to have disappointed investors.
Analysts are divided, and some remain wary of the integration risk of Latitude.sh. They're also uncertain whether Megaport can deliver on its ambitious growth and margin targets.
However, most brokers still view the booming ASX tech stock as a hold or buy. They also see a 22% upside with an average target price of $16.55 over the next 12 months.
