Megaport investors don’t know what to make of the 1HY23 result

Nick Sundich, February 9, 2023

Megaport (ASX:MP1) shares rose in early trading this morning after its 1HY23 results came out. But the share price crumbled as the morning progressed. So what’s going on this morning?

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Megaport shares are well below all-time highs

Megaport shares were attractive throughout the pandemic. Given it provides management software for businesses to connect various Cloud solutions with security and ease, it benefited as businesses pivoted to remote operations. As inflation has increased, workers returned to the office and investors shifted their appetite to re-opening stocks, Megaport shares fell over 70% from their all time highs around $22 in November 2021.

Megaport (ASX:MP1) share price chart, log scale (Source: TradingView)

But today initially provided a slight reprieve

Barely a week after its 2Q23 quarterly cahs flow report, which were received negatively by investors, the company released its 1HY23 results. In response, Megaport shares initially rose 7%. They entered negative territory by 10.30am, down 4%, although this was a more modest response compared to reporting seasons in the recent past.

The company’s EBITDA rose from a $5.3m loss to a $2.3m profit while its net loss shrunk 37% from $14.6m to $9.2m. Revenues increased 27% from $37.4m to $47.4m. Megaport also announced it would engage external consultants to review operational efficiency, a move that will likely help its push to profitability.

Is now the right time to invest in MP1 shares?

The short answer is “maybe”. Although the shares seemed to have bottomed out in the last 8 months, growth is still very low for a Tech company aiming to capture the move to the Cloud that has been going on for the last 10 years. We’d like to see a pick up in the growth in the number of ports (connections) in data centres, which is currently non-existent outside of the North American market. We’ll sit on the sidelines with this one.

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