Megaport Ltd (ASX: MP1) shares have lost more than 8% of their value over the last five days of trading, with no major news announced by the company. In fact, the Megaport share price had been dumped in the last four consecutive days of trading up until yesterday.
Like other technology companies, Megaport shares seems to have been negatively impacted by recent fears the incoming Democrats in the United States Government will make sweeping changes to curb ‘Big Tech’, and tighten regulations in the industry in general.
By the market’s close today, the Megaport share price was trading 0.08% higher at $13.04.
What is Megaport and how did it perform in 2020?
Megaport is a global provider of elastic interconnection services. This means it provides corporate clients the flexibility to manage their bandwidth usage. Customers can scale up their bandwidth when demands are high, and then reduce consumption during off-peak periods.
The platform also leverages cloud-based technology to expand company networks beyond the reaches of traditional infrastructure.
The company has been an ASX success story in 2020, with the Megaport share price gaining by over 40% last year.
Megaport’s revenues jumped 66% year on year to $58 million in FY20. This came as companies shifted their employees to work-from-home arrangements, increasing the uptake of the kind of services Megaport offers.
The company’s good form has been carried into FY21, with it reporting a record first-quarter increase in customer numbers. Most of this growth came from the US.
Outlook
In Megaport’s annual general meeting in October, the company reported that it was positioned on a path to profitability.
Management said a key driver of this in FY21 would involve pushing the business to achieve breakeven on its earnings before interest, tax, depreciation, and ammortisation (EBITDA).
The core of the strategy will revolve around Megaport’s ‘Connected Edge’ platform. This allows customers to extend their networks closer to their branches and maintain them on-demand, instead of relying on traditional data centre models.
Megaport has still not achieved profitability since its initial listing on the ASX in 2015, however the company maintains it is well-funded for the next few years.
Based on the current Megaport share price, the company has a market capitalisation of around $2.1 billion.
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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends 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 Bruce Jackson.
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