NextDC share price hits 52-week low: Is it a bargain buy?

The NextDC Ltd (ASX: NXT) share price dropped to a 52-week low of $9.44 this morning before rebounding slightly.

This means the data centre operator’s shares are now down 26% since the start of the year.

Where next for the NextDC share price?

While it is difficult to say where the NextDC share price will go in the immediate term, it is worth noting that several brokers see major upside potential over the next 12 months.

For example, a recent note out of Goldman Sachs reveals that its analysts have a conviction buy rating and $14.30 price target on the company’s shares.

Based on the latest NextDC share price, this implies huge potential upside of 50% for investors over the next 12 months.

Goldman Sachs was pleased with NextDC’s performance in FY 2022 and guidance for the year ahead. It commented:

NXT reported a solid FY22 result, with revenue/EBITDA -1% vs. GSe, but within/above its upgraded guidance range. Positively FY23 Rev/EBITDA guidance for +19%/+15% growth was provided, which was +1% vs. Gse.

We revise NXT FY23-24 EBITDA +2%/+0% given stronger yields, offset by higher costs. Our 12m TP is +1% to $14.30. Stay Buy (on CL) ahead of the acceleration in growth following S3/M3 openings and supply chain normalization.

What else?

Analysts at Morgans are similarly positive on the NextDC share price. They currently have an add rating and $13.30 price target on the company’s shares.

Morgans commented:

Structural demand for cloud and colocation remains incredibly strong. NXT’s new S3 and M3 data centres go live shortly and this should result in significant new customer wins over the next six months (including CSP options being exercised). Sales should drive the share price higher. NXT looks comfortably on-track to generate over $300m of EBITDA in the next three to five years.

Finally, the team at Citi currently has a buy rating and $12.90 price target on NextDC’s shares. It explained:

We see the pick-up in Enterprise/Retail bookings as positive for both yield and the potential for higher power costs to accelerate the shift to co-location datacenters. Further, while NXT has not quantified it, the increase in hyperscale options backlog underpins our medium-term earnings.

However, with customer deployments being impacted by supply chain issues, we lower FY24e EBITDA by -3% and target price by -8% to $12.90 to reflect slower billing ramp. Update on the Asian expansion represents the next catalyst, with NXT pointing to an organic build as its preferred option. With ~$1.9 billion in liquidity, we see NXT as having ample capacity to fund an organic DC build in Asia.

All in all, these brokers appear to see the NextDC share price as a bit of a steal at its 52-week low.

The post NextDC share price hits 52-week low: Is it a bargain buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in NEXTDC Limited. 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 Scott Phillips.

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