This report is an updated version of the report published on 1 May 2025 at 11.33 PM AEST.

Megaport Limited (ASX:MP1)

MP1 is an ASX-listed provider of software-defined networking based elastic interconnection services. The company partners with global service providers, DC operators, systems integrators, and managed services companies, and operates in 850+ enabled locations worldwide.

Recommendation Rationale – SELL at AUD 11.700 

• Financial Highlights: In 1HFY25, EBITDA decreased by 9% YoY to AUD 27.58mn, compared to AUD 30.15mn in 1HFY24. Direct network costs increased to AUD 19.47mn in 1HFY25, from 18.18mn in 1HFY24. Net profit for the same period saw a YoY drop of 80.09% to AUD 0.89mn in 1HFY25, down from AUD 4.45 in 1HFY24. These declines were mainly attributed to increased employee expenses, professional fees, and marketing costs.
• Trading Near the Resistance: MP1 stock has surpassed its R1 level recommended on 28 March 2025. Therefore, share price can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash flow, Price/Book) are higher than the median of Information Technology sector.

• Market Risk: The Network-as-a-Service (NaaS) industry is rapidly evolving, and failure to adapt to new technologies and changing market demands could negatively impact MP1's competitive position.

MP1’s Daily Price Chart

Valuation Methodology: Price/Earnings Approach (FY June'26E) (Illustrative)

Stock might trade at a slight premium to its peers considering the increased revenue in 1HFY25, expanding customer base, expected revenue in FY25 and anticipated EBITDA for FY25. For conducting the valuation, the following peers have been considered: TechnologyOne Ltd (ASX: TNE), Macquarie Technology Group Ltd (ASX: MAQ), Wrkr Ltd (ASX: WRK), and others have been considered.

Considering that the stock has surpassed its R1 level, macroeconomic uncertainty, current trading level, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 11.700 (as of 1 May 2025, at 10:27 AM AEST).

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 1 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided have been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.