Up 90% in a month, why did Megaport shares just get downgraded?

Megaport Ltd (ASX: MP1) shares rocketed 19% higher last week, and set a new 52-week high of $21.16 on Friday.

The share price spike followed Megaport’s announcement that it had won four new AI infrastructure contracts worth $458.9 million.

The contracts necessitate major capital expenditure, so Megaport launched a fully underwritten $827.3 million entitlement offer.

The company completed the institutional component of the offer, priced at $14.30 per share, on Friday.

Today, Megaport shares are maintaining their upward trajectory despite the broader market sinking into the red.

Megaport shares are 0.65% higher at $18.60 while the S&P/ASX 200 Index (ASX: XJO) is down 0.2%.

Broker downgrades winning ASX 200 tech share

Morgans has just published a new note on Megaport shares.

The broker downgraded the ASX 200 tech share from a buy to accumulate rating.

Morgans points out that it did so following a 90% increase in the Megaport share price over just one month.

The broker also lifted its 12-month target price from $15.50 to $21.

Morgans said:

MP1’s move to expand TAM from comms to compute has paid off handsomely over the last few months with more compute ARR sold in the last 1.5 months than comms ARR has been sold in the last 13 years.

This success in compute is symbiotic with the core communications platform and AI where GPU’s further deepen this symbiotic relationship. Consequently, MP1 is launching an on-demand globally distributed AI Inference cloud.

This, plus recent take-or-pay-style contract wins has prompted a ~A$809m capital raise.

We materially lift our earnings and our Target Price lifts to $21 per share.

It was less than a month ago that Morgans reaffirmed its buy rating on Megaport shares and raised its target from $13.50 to $15.50.

An accumulate rating means Morgans is still optimistic on this ASX 200 tech share, and still recommends buying it.

However, the accumulate rating signals a bit of caution, given the 12-month price target implies only 13% upside from here.

Entitlement offer for retail investors opens Thursday

The institutional component of the entitlement offer raised about $518 million.

Management expects the retail component, to be offered to ordinary investors from Thursday, will raise $309 million.

Investors who already held Megaport shares at 7pm last Friday are entitled to participate in the offer.

The retail component will close at 5pm (Sydney time) on Monday, 29 June.

Under the offer, shareholders are entitled to apply for one new Megaport share for every 3.08 shares they already own.

Details about how to apply for the new Megaport shares will be in the retail offer booklet, available Thursday.

The post Up 90% in a month, why did Megaport shares just get downgraded? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen 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.