Megaport shares (ASX: MP1) closed at a record high of A$22.34 ahead of the weekend, capping an impressive week of momentum off the back of AI infrastructure contract wins, and a significant guidance upgrade.
Megaport shares were the ASX 200 leader on the day, with a gain of 10.32% bringing with it the stock’s first ever close above the A$22 threshold and setting a new all-time high record close. Friday’s move extended the weekly gain to 13.86%, itself building on a 24.85% September bounce. Year-to-date, the stock has now climbed 87.73%, making it one of the standout performers on the index.
The technical picture supports the bulls heading into the new week, as Megaport shares both tested and held the 50-day simple moving average at A$18.65 before breaking higher. As we head into the open, the RSI has stretched to within touching distance of overbought at 69.12, raising one potential technical obstacle for the rally.
Fundamentals Drive The Move In MP1
The fundamental drivers behind the move to highs is meaningful, as the company announced three new AI infrastructure contracts carrying a combined Total Contract Value of A$978.6 million. These additions lift total strategic contract value signed since April to approximately A$2.3 billion and push the group’s Annual Recurring Revenue to roughly A$1.1 billion.
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Critically, the contract structure includes A$322.6 million in upfront customer prepayments. That cash injection effectively funds the capital expenditure required to build out and deploy the GPU and CPU compute infrastructure underpinning these agreements, removing the need for shareholder dilution through equity raises. For a company that has historically operated as a software-defined networking provider, the pivot toward AI inference cloud infrastructure represents a meaningful expansion of Megaport’s addressable market and revenue profile.
The contract wins also prompted a material upgrade to the company’s FY27 financial outlook. Revenue guidance was lifted to a range of A$720 million to A$810 million, up from the prior guidance band of A$620 million to A$730 million. EBITDA margin expectations were similarly revised higher, to a range of 42% to 44%, compared with the previous 38% to 40% target.
The trajectory implied by those numbers is striking, as Bell Potter forecasts underlying EBITDA to grow from A$77 million in FY26 to A$329 million in FY27 and A$726 million in FY28, representing a near tenfold increase across a two-year period.
What Lay Ahead?
During the past week, Bell Potter initiated coverage on Megaport with a Buy recommendation and a price target of A$27.00, with the valuation blending an EV/EBITDA approach, applying a 10.0x multiple to its underlying FY28 EBITDA forecast, with a discounted cash flow model using a 10.1% weighted average cost of capital and a 3.5% terminal growth rate.
Markets will be watching this one closely, as deploying large-scale GPU compute infrastructure at the pace required will not be easy. Any slippage in delivery timelines could weigh on sentiment, particularly given that the current valuation is anchored to FY27 and FY28 forecast delivery.
The RSI reading of 69.12 introduces a technical consideration. While not yet in overbought territory by conventional measures, the proximity to 70 raises the probability of near-term consolidation or profit-taking, particularly among recent buyers looking to lock in profits from the recent bounce. A pullback to test support would not necessarily be the end of the world for bulls, potentially offering a more attractive entry point for those who missed the initial breakout.
Bull Case:
- A$322.6M in upfront prepayments funds AI capex without shareholder dilution.
- ARR of A$1.1B and A$2.3B in total strategic contracts validates long-term revenue visibility.
- MP1 trades at a steep 7x FY28 EV/EBITDA discount versus domestic peers at 15x.
- FY27 EBITDA margin upgraded to 42%-44%, signalling strong operating leverage ahead.
- Broker targets of A$25-A$27 imply 12%-21% further upside from current levels.
Bear Case:
- RSI at 69.12 approaches overbought territory, raising short-term consolidation risk.
- Valuation relies heavily on FY28 forecasts; any near-term miss could hurt sharply.
- GPU compute deployment at scale carries significant execution and supply chain risk.
- Power procurement challenges could delay contract delivery and pressure margins.
- Rapid YTD gains of over 70% increase vulnerability to broader market sentiment shifts.
