MP1: Latitude Acquisition And India Expansion Will Drive Future Market Upside

Analysts have nudged their Megaport price targets higher, with our fair value estimate moving from A$16.76 to A$16.98. They cite the Latitude.sh acquisition as a way to expand the addressable market and create cross selling potential on what they view as reasonable and attractive deal multiples.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the Latitude.sh deal as a way for Megaport to reach a larger total addressable market, particularly with the planned expansion into India, which they see as supportive for the company’s growth runway.
The A$150m upfront consideration is framed as a reasonable acquisition multiple, which bullish analysts see as supportive for valuation if Megaport can execute on integration and revenue opportunities.
Higher price targets, such as A$16.70 and A$20, reflect the view that cross selling opportunities from the Latitude.sh acquisition could improve revenue visibility and justify a higher implied multiple.
Some bullish commentary points to the capex payback period on the acquired assets as attractive, which they see as helpful for returns on invested capital if Megaport delivers on its expansion plans.

Bearish Takeaways

Bearish analysts may focus on the risks around integrating Latitude.sh and delivering the expected cross selling benefits, which could affect execution if ramp up takes longer than anticipated.
The use of an underwritten placement to fund the A$150m acquisition can be a concern for investors who are cautious about dilution and the impact on per share valuation metrics.
There is potential for scepticism around the assumed addressable market uplift in India and other regions if customer adoption or monetisation does not track analysts’ expectations.
Some investors may question whether the acquisition multiples remain attractive if operating costs or additional capex are higher than initially framed, which could weigh on future returns.

What’s in the News

Telehouse Canada announced a partnership with Megaport that brings Megaport’s cloud connectivity platform, including access to more than 280 cloud on ramps and over 300 service providers, into Telehouse Canada data centres. This gives customers on demand, scalable connections to major cloud and IT services and to Megaport’s AI Exchange ecosystem (Client Announcements).
Megaport completed a Follow on Equity Offering of A$200 million, issuing 13,986,014 ordinary shares at A$14.30 per share with a A$0.286 discount per security, described as a subsequent direct listing (Follow on Equity Offerings).
Megaport filed for the A$200 million Follow on Equity Offering of 13,986,014 ordinary shares at A$14.30 per share with a A$0.286 discount per security, ahead of completing the transaction (Follow on Equity Offerings).
Megaport completed a separate Follow on Equity Offering of A$18.265729 million, issuing 1,398,601 ordinary shares at A$13.06 per share (Follow on Equity Offerings).
Megaport filed for an additional Follow on Equity Offering covering 1,398,601 ordinary shares, separate from the larger A$200 million transaction (Follow on Equity Offerings).

Valuation Changes

The fair value estimate has risen slightly from A$16.76 to A$16.98 per share, reflecting a modest uplift in the modelled outcome.
The discount rate has edged down from 8.53% to 8.52%, representing a very small change in the risk assumption used in the valuation model.
The revenue growth assumption remains effectively unchanged at around 34.00%, with the updated figure at 34.00%.
The net profit margin assumption is also effectively unchanged at about 10.24%, with only a very small numerical adjustment in the updated model.
The future P/E multiple has risen slightly from 62.05x to 62.84x, indicating a marginally higher valuation multiple being applied to projected earnings.

Expansion into new markets and advanced services enhances customer retention, market reach, and positions Megaport for sustained revenue and margin growth.
Investment in automation, innovation, and engineering builds competitive barriers and operational efficiency, supporting long-term profitability and predictable earnings.
Increasing vertical integration and competition, combined with industry shifts and capital intensity, threaten Megaport's margins, market differentiation, and long-term revenue stability.

Catalysts

About Megaport

Provides on-demand interconnection services in Australia, New Zealand, Hong Kong, Singapore, Japan, the United States of America, Canada, Mexico, and Brazil, and Europe.What are the underlying business or industry changes driving this perspective?

Megaport is positioned to benefit from the accelerated adoption of cloud, AI, and data-centric digital transformation, driving strong demand for agile, scalable interconnection and networking solutions-a catalyst for ongoing annual recurring revenue (ARR) and top-line revenue growth.
The rapid geographic and product expansion-such as the addition of 115 new data centers and numerous new on-ramps and services (Internet, Global WAN, Security)-substantially increases Megaport's addressable market and depth with existing clients, supporting both ARR expansion and higher customer stickiness; this sets up outperformance in revenue and long-term gross margins.
Heavy upfront investment in go-to-market and engineering capabilities, particularly in the US and key growth markets, is likely to yield significant operating leverage over the next 18-24 months as these investments mature, enabling revenue growth to outpace cost increases and drive EBITDA margin expansion.
Continued platform automation, software-defined networking innovation, and deepening ecosystem integration improve scalability, operational efficiency, and customer experience-enhancing net margin potential and strengthening competitive barriers, especially as customers demand more self-service, high-speed, and resilient global connections.
Significant growth in high-value enterprise clients (large customers +18% YoY, higher ARPU, record ARR "lands") and broadening of product offerings (e.g., security, Virtual Edge, NAT Gateway) directly increase customer lifetime value, reduce churn, and support sustained improvements in both revenue trajectory and earnings predictability.

Megaport Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Megaport's revenue will grow by 18.2% annually over the next 3 years.
Analysts assume that profit margins will increase from -0.1% today to 6.7% in 3 years time.
Analysts expect earnings to reach A$25.1 million (and earnings per share of A$0.24) by about September 2028, up from A$-292.0 thousand today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$58.3 million in earnings, and the most bearish expecting A$-9.0 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 124.2x on those 2028 earnings, up from -8254.4x today. This future PE is greater than the current PE for the AU IT industry at 37.6x.
Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.26%, as per the Simply Wall St company report.

Megaport Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Hyperscaler cloud vendors (AWS, Azure, Google Cloud) may further vertically integrate core connectivity offerings, bypassing and commoditizing independent providers like Megaport-eroding market access, pricing power, and putting long-term revenue growth at risk.
Intensified competition from large interconnection operators (e.g., Equinix, Digital Realty) and cloud-native alternatives could drive sustained pricing pressure, lower gross margins, and restrict Megaport's ability to maintain or expand both top-line revenue and net margins over time.
The company's model is highly capital-intensive and dependent on aggressive investment in network expansion, engineering, and go-to-market; if anticipated returns from these investments take longer than expected-or secular industry growth slows-Megaport risks overextending, resulting in declining free cash flow and profitability pressure.
Ongoing customer concentration in major tech and cloud sectors combined with potential shifts toward data localization or sovereign data laws may fragment global connectivity requirements, constraining Megaport's addressable market and introducing volatility in recurring revenue.
Rapid advances in open-source networking solutions and automation may accelerate service commoditization, decreasing customer switching costs and forcing further margin compression, which could negatively impact long-term earnings growth and market differentiation.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of A$15.172 for Megaport based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$19.09, and the most bearish reporting a price target of just A$11.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$374.8 million, earnings will come to A$25.1 million, and it would be trading on a PE ratio of 124.2x, assuming you use a discount rate of 8.3%.
Given the current share price of A$14.99, the analyst price target of A$15.17 is 1.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cloud And AI Adoption Will Expand Global Connectivity