On Thursday, RBC Capital adjusted its stance on Megaport Ltd. (MP1:AU) (OTC: MGPPF), downgrading the stock from Outperform to Sector Perform and reducing the price target to AUD11.00 from AUD15.00. The revision comes after the company's fiscal year 2025 guidance fell short of market expectations, prompting a reevaluation of Megaport's growth trajectory.
RBC Capital's new price target reflects a reassessment of the company's future performance, as analysts noted that the fiscal year 2024 results were consistent with forecasts, but the outlook for fiscal year 2025 did not meet market predictions. This discrepancy led to a downward adjustment in stock valuation as investors recalibrated their expectations to align with a slower growth pace.
The firm highlighted that while Megaport's recent results were on target, the forecast for the following year raised concerns about the company's ability to sustain growth. RBC Capital pointed to the need for more consistent indicators of success from Megaport's efforts to enhance its product offerings and sales strategies, particularly amidst ongoing investments into the business.
In response to the updated guidance, RBC Capital has revised its financial model for Megaport, resulting in a decrease in revenue and EBITDA estimates for fiscal year 2025 by 6% and 12.5%, respectively, compared to previous projections. This recalibration has directly influenced the new price target.
The firm concluded its assessment by stating that until there is clear evidence of Megaport's ability to drive growth through its revised sales initiatives and product mix, the stock will be rated at Sector Perform, indicating a neutral outlook on the company's near-term performance.
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