It has been a pretty horrible day on the Australian share market.
The S&P/ASX 200 Index (ASX: XJO) is down 1.56% to 8,772 points on Thursday afternoon, putting it on track for its worst session in 6 months.
But you wouldn't know it looking at Megaport Ltd (ASX: MP1).
Megaport shares are up another 3.40% to $18.26 today and have now climbed more than 10% over the past week.
I have been watching this one closely since investors smashed the share price after its FY26 results last month.
Personally, I think the market went too far.
And with the shares starting to move higher again, I think $25 could be back on the table sooner than many investors expect.
Image source: Getty Images
Why did Megaport shares get smashed?
Megaport was trading above $22 in August before falling as low as $16 earlier this month.
The big concern was spending.
Management expects capital expenditure of between $1.28 billion and $1.38 billion in FY27 as the company pours money into its growing compute business.
That is obviously a huge number for a company with a market capitalisation of around $4.3 billion.
But I think investors became so focused on the spending that some of the growth numbers were pushed aside.
FY26 revenue increased 37% to $312.2 million, while group annual recurring revenue jumped 62% to $395.2 million.
EBITDA came in at $77.1 million, with a margin of 25%.
And FY27 could be a much bigger year.
Megaport expects revenue of between $620 million and $730 million, meaning revenue could at least double this year.
There is a lot happening here
The part I like is that Megaport isn't simply spending billions and hoping customers eventually turn up.
The company has already signed several large contracts.
Its three major deals through Latitude.sh are worth around US$359 million combined and cover GPU and CPU compute, networking and storage.
Megaport also operates across more than 1,200 enabled data centres in 30 countries.
With AI requiring huge amounts of computing power and data to move between different locations, I think Megaport is sitting in a pretty good spot if demand continues growing.
Of course, management still needs to execute.
But I believe the recent sell-off gave investors a much better entry price than they had only a few weeks ago.
Could Megaport shares reach $25?
I think they can.
Morgans and Morgan Stanley both have $25 price targets on Megaport shares, while Citi recently lifted its target to $24.60.
A move to $25 would mean another gain of around 38% from today's price.
I'm not saying it will happen in a straight line. Megaport has shown us plenty of times how quickly its share price can move in both directions.
But if the company keeps delivering on its contracts and investors remain positive heading into year-end, I think $25 during the Christmas rally is very possible.
