This ASX tech stock has exploded 75% in a month, but can it climb higher?

ASX tech stock Megaport Ltd (ASX: MP1) has gone absolutely ballistic lately.

On Thursday alone, the ASX tech stock blasted 27% higher to $12.58 after delivering a major announcement tied to the booming artificial intelligence sector.

That latest surge means Megaport shares have now skyrocketed an eye-watering 75% over the past month. Remarkably though, the stock is still sitting marginally lower than this time last year, highlighting just how volatile the journey has been for investors.

Now the big question being asked across the market is simple: can this rally keep going?

Three major contracts

First, it is worth understanding exactly what Megaport does. The ASX tech stock operates a global network-as-a-service platform that allows businesses to instantly connect to cloud providers, data centres, and internet infrastructure around the world.

That positioning is becoming increasingly valuable as artificial intelligence, cloud computing, and digital infrastructure demand continue accelerating globally.

And this week, the company delivered exactly the kind of update growth investors love to see. Megaport unveiled three major contract wins tied directly to the booming AI sector. Combined, the deals carry a total contract value of US$182.9 million, or roughly A$254 million.

Even more importantly, management of the ASX tech stock expects the contracts to generate approximately US$65.2 million (A$90.6 million) in annual recurring revenue.

That instantly caught the market’s attention. Recurring revenue is highly prized in technology investing because it improves earnings visibility and can create powerful operating leverage as businesses grow.

The contracts also strengthen Megaport’s position as an emerging AI infrastructure player rather than simply another speculative tech stock riding the hype cycle.

Fierce cloud competition

Of course, risks still remain. ASX tech stocks can stay extremely volatile, particularly after sharp rallies like the one Megaport has experienced over the past month.

Competition across cloud infrastructure and connectivity markets also remains fierce, with global giants constantly investing heavily in the space.

Execution will also be critical. Investors will want proof that Megaport can successfully deploy the required infrastructure, manage costs carefully, and convert this momentum into sustained profitability growth.

What next for the ASX tech stock?

Still, analyst sentiment currently appears very supportive. According to TradingView data, 12 of 15 analysts covering the ASX tech stock currently rate it as either a buy or strong buy. The remaining three have hold recommendations.

The average analyst price target sits at $15.32, implying roughly 22% upside from current levels.

Meanwhile, the most bullish valuation among analysts suggests Megaport shares could climb as high as $24. That would suggest a potential gain of around 90% from the current share price.

So while the stock has already staged a stunning rally, many analysts clearly believe the AI-fuelled growth story may only just be getting started.

The post This ASX tech stock has exploded 75% in a month, but can it climb higher? appeared first on The Motley Fool Australia.

More reading

• ASX tech shares vs. ATEC ETF: How they fared during sector downturn
• Why Megaport just landed its biggest ever AI infrastructure contract
• Here are the top 10 ASX 200 shares today
• Why is this ASX tech stock rocketing 35% today?
• Why Codan, Medallion, Megaport, and Mineral 260 shares are storming higher today

Motley Fool contributor Marc Van Dinther 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. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.