Megaport Ltd. (ASX:MP1) shares were down more than 5% at around midday, after hitting a day’s low of AU$7.62. Megaport provides software-based network interconnection solutions to global clients. The shares fell as investors moved to cut their exposure to the technology sector, with the S&P/ASX 200 Information Technology (XIJ) index dropping more than 2% by midday.
The other technology shares declining alongside Megaport stock were Xero Limited (ASX:XRO) and Wisetech Global Ltd. (ASX:WTC). The drop in ASX tech shares followed the overnight decline in U.S. tech stocks, with the Nasdaq-100 (NDX) index retreating.
Concerns over a potential recession as central banks scramble to stem inflation, appear to be weighing on sentiment toward tech shares. The Reserve Bank of Australia is set to hike its benchmark interest rate for a sixth consecutive time next Tuesday, in the ongoing inflation fight.
Megaport share price prediction
Megaport shares have climbed about 40% over the past three months, but they are still down nearly 60% from where they began the year. However, the pullback in Megaport shares may be an opportunity for investors to buy the dip.
According to TipRanks’ analyst rating consensus, Megaport stock is a Moderate Buy based on six Buys and three Holds. The average Megaport share price target of AU$10.87 implies about 40% upside potential.
Megaport scores a nine out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Closing remarks
Rapidly rising interest rates can increase borrowing costs for tech companies, which tend to rely on loans to fund their growth. Additionally, a recession can diminish sales opportunities for tech companies. Despite these potential headwinds, analysts believe that Megaport remains an attractive investment.
