Wasn't sure if this would be a bear case but yesterday Chairman Bevan Slattery sold 1m shares.

[Held]

JP Morgan Research note

[held]

As we already know, Megaport broke the lights out today and probably sent shorts scrambling with a 25% rally to close at $12.48.

Seems like a beat on most metrics versus consensus

JP Morgan from 26-Oct-23 had forecasted 95m. See below

Finally a little summary from Citi - "Australia's Megaport soars over 30%, tops ASX 200 on earnings beat" - Reuters 30 Jan 24

The Brisbane-based firm reported second-quarter operating earnings of A$15.1 million ($9.98 million), compared with a Visible Alpha consensus estimate of A$11.3 million, according to Citi.

Its quarterly revenue of A$48.6 million was 2% ahead of Citi estimates.

"While KPIs (key performance indicators) continue to be soft, this was expected and we continue to see upside to VA consensus EBITDA (earnings before interest, taxes, depreciation, and amortization) FY24e forecasts given the 1H beat," Citi analysts wrote.

"We expect the share price to outperform today due to the FCF (free cash flow) and EBITDA (earnings before interest, taxes, depreciation, and amortization) beat."

Capital IQ Pro only had the FY24e but sentiment score is the highest for the last 12 months.

Given we are at the halfway mark, it looks like Megaport will most likely beat the full year forecasts on at least revenue and free cashflow.

[held]

Since Megaport is a big following here I'll start with a straw with the results and leave the deep dive for others.

A bit of concern with some KPIs being flat QoQ.

MP1 at one stage down more than 20%. Was tempted to buy that dip (8.95) but seems to have recovered.

Price targets from Street Account/Factset

Megaport upgraded to buy / high risk from neutral at Citi

Thursday, May 25, 2023 11:17:05 PM (GMT)

• Target increased to A$7.40 from A$7.05, 15% upside (FactSet average target ~A$8; range A$5-16)
• Analyst is Siraj Ahmed

Megaport upgraded to buy from hold at Canaccord Genuity

Monday, May 01, 2023 10:38:20 PM (GMT)

   Target increased to A$7.10 from A$6.30, 28% upside (FactSet average target ~A$8; range A$5-16)

   Analyst is Conor O'Prey

My personal view:

Out of the 5 cloud projects I'm on or know of at work, only one project is using Megaport. And it has always been like this for the last 12 months and maybe the next 3-6 months at least as we deploy other cloud projects.

It would be good if someone could find a more bullish case from cloud engineer background that has used Megaport frequently on their projects rather than citing financial metrics.

Being a devils advocate again for Megaport as usual

Was in a meeting yesterday discussing how to link a cloud network to an on premise environment at a tertiary institution with high bandwidth speeds..

Megaport wasn't even mentioned in the conversation even though we probably know we can use them despite the masses of Megaport youtube training videos done by the cloud provider. Instead we went with some other provider and it will take a few weeks to provision. That provider has a long term relationship with that institution.

I can't disclose the provider or the institution but it seems winning these "blue chip" government projects will be pretty tough for Megaport due to the preferred relationship.

I had a look at an environment that uses Oracle Fastconnect.

One of them do use Megaport as a provider. Without disclosing too much into the project I can't say if this is permanent or not.

What I can say is, most fastconnect services - Megaport or otherwise, would be used for migrations than become a permanent fixture unless there is a specific requirement. So I think there is still some transient nature to Megaport's revenue even though they have the rare distinction for providing "rapid provisioning". So once the migration is done, my guess is the client will transition to a service that is less costly.

Hence why I'm not ready to dive into Megaport, even at this price and even after what I've seen. Their service is definitely revolutionary, but I feel there are many other options out there as well. Not to mention if a customer is a Microsoft house, they will most likely go with Azure Connect instead.

Obviously I'm someone that works on the "front line", have a very biased view and I may not be seeing the bigger picture (as opposed to some financial analyst attending the end of year financial updates). Or as my high school maths teacher likes to put it - "unable to take my blinkers off" and see the light of Megaport.

If you want to see an example of Megaport's coverage (ie: the company's network effect in economics terms), look no further than Oracle Fastconnect

https://www.oracle.com/au/cloud/networking/fastconnect/providers/

I have never used Megaport for Oracle Fastconnect services and we've never really mentioned it for work. Probably because at the end of the day we use whatever service is offered at the data centre and what the client prefers to do the connection.

You can probably see why from how the connectivity is set up for the tech savvy here.

https://www.ateam-oracle.com/post/fastconnect-design

Having given a couple of bear points, most of the Oracle Cloud certification videos uses Megaport as it is quick to demonstrate. So there is a bit of free marketing there.

Hope this personal insight helps give a better picture of Megaport as an investment thesis. Despite the demo I am on the fence with this one. I'm sure this straw will be viewed with a great deal of skepticism from the bulls here.

Updating from 6 months ago as my straw got stale.

Update 1: I noticed I got a downvote for this. It would be good for someone to put a bullish view and why one should invest in a loss making firm with single digit growth (see below)

Update 2: Only 7% growth in customers. 2% increase in Qtr revenue. MRR (monthly recurring revenue) increase of 2%.

Update 3: MUFG is now offering borrowed stock to short sellers.

Share price has stayed resilient against all odds despite not making money. I've constantly watched this and feel bad about missing this boat

However I have seen the product presented in a few cloud training videos and it is pretty slick.

Plus there is that stake from Digital Reality.

Apart from that I can't think of anything else as to why price continues to go up despite the bearish views.

Maybe some brokers did some DCF valuation which resulted in the shares being pumped?

Somehow they must be doing something right to keep the share price afloat.