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Investing.com - JPMorgan downgraded Megaport Ltd . (ASX:MP1) from Overweight to Neutral while raising its price target to AUD14.50 from AUD12.30.
The rating change follows Megaport’s FY25 results, which JPMorgan described as "solid," with the company guiding to a 4% revenue beat on consensus for FY26. Despite the positive revenue outlook, FY26 EBITDA and capital expenditure guidance missed expectations significantly.
The downgrade reflects Megaport’s pivot to increased discretionary reinvestment in product development, go-to-market strategies, and network infrastructure. These investments aim to accelerate revenue growth over FY27-FY29, with an aspirational goal of achieving sustainable 20%+ ARR (Annual Recurring Revenue) growth from FY30 onward, compared to 16% in FY25 on a constant currency basis.
JPMorgan noted several positive indicators from Megaport’s 2H25 performance that support this investment strategy, including accelerating net customer logo wins, $9.6 million in incremental ARR from new products, higher early ARR contribution from new data center cohorts, and stabilized Net Revenue Retention at 107%.
The investment bank cited "elevated execution risk" as a key factor in its downgrade decision, stating that benefits from Megaport’s investments are unlikely to materialize until FY27 at the earliest, prompting a wait-and-see approach for "further evidence to support this reinvestment phase."
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