FNArena’s Weekly Insights – May 06 2024
In this week’s Weekly Insights:
Opportunity In Data Centres
By Rudi Filapek-Vandyck
The concept confounds many an investor, and market commentators too; from the moment the market understands there’s a whole lotta growth up for grabs on the horizon, share prices move onto above market-average multiples which, at face value, makes the stocks in question look ‘expensive’.
But are they really? Is the opportunity already gone?
In many cases the answer is: no, the opportunity is still there. If the promised growth comes through, and management executes on the opportunities available, there’s often plenty of room left for upside surprises, which, when looking back with hindsight later on, only makes that share price from the past, ‘bloated’ it may have looked in-the-moment, actually a cheap ‘bargain’.
One such prime example from the recent past has been delivered by healthcare imaging services provider, Pro Medicus ((PME)) whose share price has been trading on forward-looking multiples above 100x. But as the emerging global leader in its field added new contract after new contract, it forced analysts to regularly upgrade already bullish forecasts, with forward-valuations and price targets rising further on the back of it.
In simple terms: Pro Medicus shares looked ‘expensive’ back in 2020, when the price crossed the $30 mark. Last week they surged above $110. And while most analysts have valuations that are well-below that price level, Macquarie believes they are being too conservative. AI and new services and customers are still on the horizon. Macquarie has set a price target of $120. For now.………………….
