Treasure Chest | Sep 23 2025
This story features MEGAPORT LIMITED.
For more info SHARE ANALYSIS: MP1
The company is included in ASX200, ASX300, ALL-ORDS and ALL-TECH
FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Megaport
-Share price swings and renewed broker confidence
-Megaport's expanding reach through agents and new cloud providers
-Rising demand from artificial intelligence and data growth
-Moving up the stack into higher-value services
By Danielle Ecuyer
FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts.
Whose Idea Is It?
RBC Capital
The subject:
Megaport’s growth outlook is not fully appreciated by the market
More info:
Megaport ((MP1)) is a network-as-a-service provider that makes it faster and cheaper for businesses to connect directly to major cloud platforms like Amazon, Microsoft, Google, and Oracle.
Operating from hundreds of data centres worldwide, the service provided is cloud-and data-centre neutral, giving customers flexible, on-demand access across multiple providers.
As explained by RBC, Megaport’s elastic connectivity product also reduces the complexity and cost of private cloud links, helping companies adopt multi-cloud strategies and support data-heavy applications such as artificial intelligence.
With a scalable model and low capital requirements per new site, Megaport generates high incremental margins once fixed costs are covered, creating a clear path to stronger recurring earnings and free cash flow.
Share Price Recovery and Early Upgrades
After plumbing share price lows of around $7 in January, following management’s disappointing FY26 guidance at the November 2024 AGM, Ord Minnett stepped in with an upgrade to Buy from Hold.
The call came after the stock had declined more than -40% over the prior six months. Citi also brushed off negative sentiment around potential demand risks from Deep Seek, arguing at the time weakness was a buying opportunity.
Since then, Megaport’s share price has remained volatile. It fell sharply in April amid the Liberation Day tariff noise and again after the August earnings release. Yet in both cases, patient shareholders have been rewarded with strong recoveries, culminating in two September upgrades; Citi to Buy from Neutral on September 10 and RBC Capital’s subsequent upgrade this week.
Broker Conference Takeaways
At RBC’s Global Communications Infrastructure Conference, CEO Michael Reid re-iterated confidence in AI-driven demand, multi-cloud infrastructure growth, and new enterprise wins through indirect channels.
RBC highlighted signs of recovery in IT budgets after post-covid caps, with boards unlocking spending for AI projects that are flowing directly into connectivity and network demand.
The broker also noted growing needs for “neural interconnection” services across the big cloud providers, Google, AWS, Azure, Oracle, as well as GPU-as-a-service names like CoreWeave, which listed on Nasdaq earlier this year.
RBC flagged Megaport has onboarded around 36 “neo-clouds,” (think CoreWeave) enabling enterprises across its circa 1000 data centres to connect to GPU resources within 60 seconds and at up to 100Gbps speeds.
Channel Agent Model
RBC also highlighted Megaport’s heavy use of the channel agent model (independent sales agents and channel partners in the telecom and IT services industry), in the US to win new customers.
Many of these agents hold relationships across multiple verticals, including Fortune 500 companies, and influence procurement decisions for telecom and IT services.
Megaport’s 60-second provisioning allows agents to onboard clients and earn commissions much faster than through traditional telcos, which only pay once physical installs are completed.
This speed is believed to make Megaport especially attractive to the agent community and creates a pathway to secure large Fortune 500 “logo wins” (i.e. new clients).
With thousands of agents still unfamiliar with Megaport, RBC sees significant untapped growth potential in this diverse channel.
Product and Market Catalysts
Analysts have pointed to significant improvements in speed for inference companies such as Groq, which can now build connectivity infrastructure in a month via Megaport rather than years previously.
Citi upgraded to Buy from Neutral, arguing consensus revenue and earnings (EBITDA) forecasts for FY26 are too low, even as it flagged the valuation –shorter term– looks stretched.
Hiring trends support this view, with LinkedIn showing 57 new roles added in July and August. Go-to-market investment is expected to rise by $25m in FY26, which could deliver $12m in incremental revenue and lift annual recurring revenue by about 20%, or 8% above consensus, Citi explains.
The launch of 400Gbps ports is another focal point. These ultra-high-capacity connections are critical for AI and data-intensive workloads and should increase revenue per service.
The analyst cautions, however, that reported port counts may dip as customers consolidate smaller links into fewer high-capacity ones, a process referred to as “network grooming”.
Strategic Roadmap and SASE Opportunity
Beyond immediate catalysts, Jarden envisages Megaport expanding beyond its role as a global “underlay” (physical and virtual network infrastructure) provider.
Today, the business offers ports, cloud routers, and edge connectivity, but the roadmap could include overlay services such as security, monitoring, and DDoS (Distributed Denial of Service attack — one of the most common types of cyberattacks.) mitigation.
Jarden argues this would transform the revenue profile and open the door to the rapidly growing secure access service edge (SASE) and security service edge (SSE) markets.
The SASE market is expected to reach US$15bn by 2025, with SSE already valued at US$8bn. Jarden estimates by capturing just 1% of this space over five years, Megaport could lift annual recurring revenue by more than 15% and free cash flow by 60%.
The comparison is Cato Networks, a private SASE pioneer growing ARR above 50% annually and valued at 16x EV/ARR versus Megaport’s 9x.
Valuation and Ratings
Megaport’s revenue is forecast by RBC to grow from $227m in FY25 to $373m in FY28, with EBITDA more than doubling across the period. RBC lifted its rating to Outperform from Sector Perform, raising its target price to $18 from $15, reflecting higher confidence in growth between FY27 and FY30. RBC now assumes revenue compounding at 15% annually versus 11% previously.
Jarden reaffirmed its Buy rating, post initiation of coverage with a $16.77 target, while Citi upgraded to Buy, lifting its target to $16.30 from $15.45. Collectively, analysts highlight if Megaport executes on both its 400Gbps port rollout and overlay expansion, the stock could move toward a re-rating closer to peers with higher-growth exposure.
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