The NextDC Ltd (ASX: NXT) share price has been under pressure this week. Shares in the Aussie data centre operator have slumped 10.9% lower in the last 5 days to $12.12 per share.
That’s still in the middle of the company’s 52-week trading range, but investors might be wondering what’s driving NextDC’s valuation right now.
Why the NextDC share price is down 11% so far this week
Interestingly, there has been no price-sensitive news from the ASX tech group this week. That hasn’t stopped investors from selling down their exposures and pushing the NextDC share price lower.
It’s worth noting it hasn’t been a great week in general for tech shares. The Aussie markets have tended to follow Wall Street and the US markets lower following their performance overnight.
That’s certainly been the case in the past week or so. US tech shares have been smashed and we’ve seen a similar thing closer to home on the ASX.
The NextDC share price fell 2.7% lower on Wednesday as growth shares were hammered. Rising bond yields have spooked investors and there has been a pullback from those companies who have a lot of their value tied up in future earnings potential.
Rising bond yields mean higher discount rates. In laymen’s terms, a dollar earned today is worth more than a dollar earned tomorrow due to both risk and inflation.
Companies like NextDC don’t currently deliver significant earnings for shareholders. However, the future potential based on its current growth trajectory is what entices investors.
The NextDC share price slumped in late August despite a record FY21 performance. The data centre operator reported earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 29% to $134.5 million. Group operating cash flow surged 148% to $133.2 million in a bumper year of growth.
However, high expectations combined with rising interest rate fears have put pressure on the company’s shares and seen them sink 10.9% lower in the past week.
The post Why is the NextDC (ASX:NXT) share price down 11% so far this week? appeared first on The Motley Fool Australia.
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More reading
- ASX 200 tech correction? 5 of the worst-hit shares
- Why ASX tech shares are crashing on Wednesday
- Technology shares are dragging the ASX 200 down on Tuesday
- The NextDC (ASX:NXT) share price is down 3% on Monday
- 3 ASX tech shares to buy this week
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.
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