Megaport share price slumps 10%: Is it a buy now?

The Megaport Ltd (ASX: MP1) share price is having a day to forget on Wednesday.

In afternoon trade, the network as a service company’s shares are down almost 10% to $7.85.

This means the Megaport share price is now down approximately 60% since the start of the year.

What’s going on with the Megaport share price today?

Investors have been selling Megaport and other tech shares on Wednesday following a selloff on Wall Street overnight.

The selling was heaviest on the tech-focused NASDAQ index, which dropped a whopping 5.2% in response to a hotter than expected US inflation reading.

There are now concerns that the US Federal Reserve could potentially increase rates as much as 1% next week in an effort to tame inflation. But doing so runs the risk of putting the US economy into a recession.

Another issue for the Megaport share price is the impact that rising rates have on valuations. As rates go higher, investors become less willing to pay over the odds to own shares. After all, if the risk-free rate is attractive, then you’ll need an even more attractive potential return to put your money at risk.

And given how Megaport’s shares are still trading at 72x estimated FY 2025 earnings, they certainly are on the riskier side of the market.

Should you invest?

The team at Goldman Sachs appear to believe that the Megaport share price deserves to trade at a premium. This is due to “the product leadership of the company, and the rapidly growing NaaS/SD-WAN addressable markets.”

According to a recent note, the broker has a buy rating and $10.30 price target on its shares. This implies potential upside of 31% for investors over the next 12 months.

The post Megaport share price slumps 10%: Is it a buy now? appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares being hit the hardest on Wednesday?
• With most investors thinking the next big move in the stock market is down, Warren Buffett says times like these are your friend
• Why are ASX 200 tech shares having such a cracking start to the week?
• Here are the top 10 ASX 200 shares today
• Megaport share price soars 10% as ASX tech shares trump on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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