Megaport Ltd (ASX: MP1) shares have risen almost 40% over the past 12 months, but according to the analysts at Macquarie, new contract wins make the case for further strong rises even more compelling.
Macquarie has released a new research report into Megaport, with an upgraded price target, which I'll get to shortly.
First, let's look at the company's recent news.
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Major new contract wins lead to revenue upgrade
Megaport said earlier this week that it had struck three new AI infrastructure contracts worth $978.6 million in total.
The new contracts increase the company's annual recurring revenue (ARR) to about $1.1 billion, and the company would also book $322.6 million in prepayments from the contracts.
Megaport added:
The three agreements, two of which are with new customers, have a combined total contract value of approximately US$685.0M ($978.6M ) and encompass GPU and CPU compute, network, and storage for AI applications and inference workloads. These contracts are expected to contribute approximately US$162.7M ($232.4M1) in ARR. Megaport has secured 2 power and space for the new strategic customer contracts.
The company said it had started procurement for the equipment needed to replenish its GPU pool to fulfil the new contracts, and it had also secured the power and space required for the new equipment.
Megaport Chief Executive Officer Michael Reid said:
Since April, we've announced approximately $2.3 billion in total strategic contract value. Earlier deployments, new contracts, and Network growth underpin our upgraded FY27 revenue and EBITDA margin guidance. Customers have committed approximately $323 million in prepayments on today's contracts, supporting the infrastructure investment behind future growth. "We're broadening our customer base, replenishing our GPU pool, and expanding our AI inference platform. Our progress has been extraordinary, and we remain focused on delivery and disciplined investment. We're just getting started.
Megaport upgraded its full-year guidance, saying revenue was now expected to be $720 million to $810 million up from $620 million to $730 million.
The company's EBITDA margin is now expected to be 42% to 44%, up from 38% to 40%.
Megaport shares looking cheap
Macquarie said in its research note on Megaport that the company's GPU pool was a strategic advantage.
They said:
Capacity can initially support on-demand workloads but be redirected to longer-term contracts as opportunities arise. This allows MP1 to respond quickly to demand, bringing forward billing while reducing utilisation and funding risk.
Macquarie said Megaport had AI exposure with shorter lead times and less capital expenditure than data centres and neoclouds.
Following this week's update, Macquarie increased its price target for Megaport from $32 to $34.70.
If achieved, this would be a 68% increase from the current level of $20.65.
Megaport is valued at $4.91 billion.
