The NextDC Ltd (ASX: NXT) share price jumped 3.2% higher on Friday to close the week at $11.10 per share at an all-time high. NextDC shares have dipped slightly in this morning’s trade to $11.08 at the time of writing.
The data centre operator has been surging in value this year and boasts a market capitalisation of over $5 billion. But despite the recent gains, is the Aussie tech share worth buying at its current valuation?
Why the NextDC share price continues to climb
NextDC recently moved into the S&P/ASX 100 Index with the June 2020 rebalancing alongside Saracen Mineral Holdings Limited (ASX: SAR). That comes after NextDC has outperformed the benchmark S&P/ASX 200 Index (ASX: XJO) so far this year.
That’s good news for investors who have already ridden the NextDC share price higher in 2020. With continued strong demand for the company’s services, there are a few factors that I think could support NextDC shares climbing higher.
The recent announcement by prime minister Scott Morrison regarding a sophisticated cyber attack has put Aussie governments and businesses on high-alert.
NextDC has received advanced information security certifications for its data sites, which leaves it well-placed to handle sensitive information and drive future growth.
Despite its share price being near an all-time high, it seems like there are still some strong tailwinds for the ASX 200 tech share. On top of the need for upgrading cyber infrastructure, more Aussies working from home has forced a re-think of remote data security.
What are NextDC’s financials like?
In my view, the company’s strong standing in the Aussie market and its $672 million equity boost could be good news for the NextDC share price.
NextDC’s half-year results in February gave investors even more reason to be optimistic about long-term growth. Half-year revenue jumped 8% to $97.7 million through to 28 February, while underlying earnings before interest, tax, depreciation and amortisation rocketed 21% higher to $50.9 million.
The tech company reported a 6% increase in utilisation to 53.3 megawatts while customer numbers surged 16% to 1,264.
The company recorded cash and equivalents of $197 million at year-end with liquidity of $497 million. Particularly amid the coronavirus pandemic, a strong balance sheet is a vital factor for a company’s ability to ride out any economic turbulence.
Foolish takeaway
The NextDC share price may have hit a new record high, but in my view that doesn’t mean it can’t climb higher. The combination of supply–demand tailwinds, a strong balance sheet and demonstrated growth bode well for the tech share in 2020.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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