Nextdc Ltd. shares rebounded after a profit warning over protests at one of its sites triggered the biggest drop since the company listed in 2010. The stock climbed as much as 8.2% in Sydney on Thursday, after plunging 42% in the previous session.
Morningstar analyst Dan Baker said the selling was overdone. "While earnings from this site will likely be delayed and may be reduced should alternative power costs be more expensive, we don't see such a large reduction in the business' medium-term outlook. Its assets, both current and planned, are still in great demand."
Nextdc slashed its full-year earnings guidance by a third on Wednesday after protests delayed power supply to M3 in Melbourne's west. The company is also reviewing its capital expenditure program and has put all land acquisitions on hold as it reassesses its development plans. Morgan Stanley analysts Andrew Mc Leod and Angela Sutcliffe called the selloff overdone and an attractive opportunity, but warned that "there are now a number of new critical issues to work through," including consulting with the local community and local governments.
The plunge wiped about A$2 billion from Nextdc's market value and spread across other ASX-listed data-center operators, contractors and suppliers. Morgans Financial Ltd. analyst Nick Harris said Nextdc shares are "incredibly cheap" and the discount is "unwarranted if these issues are just short term in nature." He added that management needs to de-risk these key concerns for equity investors, which could take some time.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing