Why did the Megaport share price crash 22% today?

It has been a day to forget for the Megaport Ltd (ASX: MP1) share price.

The network-as-a-service provider’s shares ended the day a whopping 22% lower at $6.61.

Why did the Megaport share price crash deep into the red?

Investors have been selling down the Megaport share price today following the release of the company’s first quarter update.

Although Megaport delivered quarter on quarter growth across almost all key metrics, it appears as though investors were expecting stronger numbers.

For the three months ended 30 September, the company reported a 9% (6% constant currency) increase in monthly recurring revenue (MRR) to $11.6 million.

This led to its quarterly revenue increasing 10% quarter on quarter to $33.7 million and its annualised recurring revenue lifting 8.3% to $139 million.

This was driven partly by a modest 2% increase in customer numbers to 2,700 and a 1% increase in total ports to 9,606. Though, the latter reflects non-revenue impacting customer-related port consolidation. This follows an increase to capacity on its cloud connections with 100 Gbps on-ramps.

What else?

One metric that went backwards during the quarter was its installed data centres, which could have investors a little concerned.

Megaport’s services are installed in 422 data centres now, down from 423 data centres three months earlier. And while one less centre may not be something to panic about, investors may fear that this is a sign that its footprint is peaking.

Another metric that may have caught the eye was Megaport’s cash balance. Although it was profitable at an EBITDA level for a second quarter in a row, it is still burning through cash.

The company ended the quarter with a cash position of $69.4 million. This is down $13.1 million from $82.5 million at the end of June. Based on this cash burn rate, the company has 5.3 quarters of cash left.

Short sellers will be happy

One group of investors that will be happy with the Megaport share price weakness is short sellers.

As we covered here at the start of the week, the company is one of the most shorted shares on the Australian share market right now.

The post Why did the Megaport share price crash 22% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 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 Scott Phillips.

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