Megaport Ltd (ASX: MP1) has had plenty of news out this week, but we haven't seen a share price reaction as the stock has been in a trading halt.
That hasn't stopped the team at Macquarie running the ruler over the company and issuing a bullish target price, which we'll get to shortly.
Firstly, let's look at what Megaport has said this week.
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Major contracts won
The company said in a statement to the ASX on Wednesday that it had secured four new AI infrastructure contracts with a combined total contract value of about $458.9 million.
These contracts would require $369.5 million in infrastructure spending, "primarily for high-performance NVIDIA GPUs, network, and storage infrastructure''.
Megaport also said it would establish an on-demand GPU pool, supported by $350 million in investment, "providing enterprise customers with access to AI infrastructure through both contracted and consumption-based commercial models''.
The company added:
Newly secured contracts and creation of the GPU Pool form the foundation of Megaport's strategy to establish a Globally-Distributed AI Inference Cloud leveraging its footprint of more than 1,100 connected data centres across 31 countries.
To fund these new developments, the company launched a rights issue to raise $827.3 million at a share price of $14.30. This compares to the current share price of $16.61.
Megaport Chief Executive Officer Michael Reid said AI inference was "one of the biggest infrastructure opportunities of the next decade''.
He added:
The contracts announced today reflect the accelerating demand for globally-distributed AI inference infrastructure. Megaport's software-provisioned compute, network, and storage platform positions us strongly to meet that demand. "The proceeds from the Entitlement Offer will enable us to fulfil contracted customer demand while building an on-demand GPU Pool that creates new opportunities across enterprise and sovereign AI markets globally. "AI inference is becoming a global infrastructure challenge, not simply a GPU problem. As AI adoption accelerates, organisations need seamless access to GPUs, CPUs, storage, and the connectivity that powers them. Megaport is built to deliver it all.
Megaport shares looking cheap
Macquarie said in a note to clients after the announcements that Megaport was a "high quality AI play with improving core business''.
They added:
50% of new contracts are existing customers, the rest are new. One of these customers provides global inference nodes to enterprise, suggesting this customer is strategically important and can grow in time.
Macquarie said Megaport offered AI exposure with shorter lead times and less capital expenditure than data centre operators.
Macquarie has an outperform rating on Megaport shares and a 12-month price target of $27.80.
Megaport is valued at $2.95 billion.
