The Megaport Ltd (ASX: MP1) share price is up more than 1% today in reaction to the FY20 result (after rising 10% yesterday).
Megaport describes itself as a leading global provider of elastic interconnection services. It’s involved in rapidly connecting customers’ network to other services from the major technology providers like AWS, Google Cloud, Microsoft Azure and so on.
Megaport FY20 result
Megaport reported that its revenue increased by 66% to $58 million with monthly recurring revenue (MRR) increasing 57% year on year to $5.7 million.
The number of installed data centres at the end of June 2020 rose by 22% to 366 locations. Enabled data centres grew by 27% to 669 locations. Customers increased by 24% to 1,842 and the number of ports increased by 42% to 5,767. The number of total services increased by 45% to 16,712.
Average revenue per port increased by 10% to $980. This partly helped the company generate a ‘profit after direct network costs’ of $29.5 million, up 147% year on year.
However, the company overall reported a net loss for the full year of $47.7 million.
During the financial year, Megaport undertook two capital raisings which raised $134 million to accelerate its expansion to new locations and markets, conduct capacity upgrades, fund innovation and developing new technology, and generally funding the business.
‘Megaport Virtual Edge’
A couple of days ago the company announced the development of Megaport Virtual Edge (MVE) which will integrate Megaport’s platform with various networking technologies. Megaport said MVE will enable businesses to achieve global network connectivity by securely connecting users, branch locations, data centres and XaaS “in a matter of minutes” (note: XaaS means Anything as a Service).
Megaport has partnered with Cisco to enable SD-WAN as the first use case on MVE. Widespread availability for MVE is expected in the second quarter of FY21 with Cisco secure SD-wan available in the FY21 third quarter.
What now?
In FY21 Megaport’s management team are aiming to achieve EBTIDA breakeven (click here to learn what EBITDA means) on an ‘exit run-rate basis’. They believe the business is well-positioned to achieve its revenue and profitability objectives.
Clearly, the company is very innovative and it’s providing a valuable service to the world. However, I’m not sure how much growth potential the company has left, how much competition there’s going to be for data services and what a fair valuation for Megaport shares is. Therefore, I’d personally rather invest in ASX growth shares I have a better understanding of, such as Pushpay Holdings Ltd (ASX: PPH).
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