MP1 Shares Plummet 16.3% in Morning Trade

The Megaport Ltd (ASX: MP1) share price took a major hit, plummeting by AU$1.88 in early trading, marking a significant 16.3% loss from the previous day's closing price of AU$11.51. The sharp decline came on the heels of the company's latest quarterly update, which sparked panic selling among investors.

A Closer Look at the Quarterly Update

Megaport, a virtual networking technology provider, has been focused on transitioning from a cash-burning business to one that is financially sustainable. The September quarter update appeared to reflect progress in this direction, with notable financial highlights:

• EBITDA of AU$15 million, up from AU$14 million compared to the previous year.
• Positive cash flow from operating activities, amounting to AU$10.7 million.
• A 5% increase in revenue, reaching AU$46.5 million compared to the previous quarter.
• A record annual recurring revenue of AU$189.8 million, showing a 5% increase from the previous quarter.

Megaport's CEO, Michael Reid, indicated that the first quarter of the fiscal year had set a positive tone, emphasizing their commitment to enhancing customer value and driving Annual Recurring Revenue growth.

Dismal Customer Growth and a US Tech Selloff

Despite these seemingly positive results, investors reacted with disappointment. One primary cause for concern was the lackluster customer growth. Megaport managed to increase total services by only 2% in comparison to the June quarter, and new customer ports grew by a mere 1%.

Furthermore, a potential contributing factor to the share price plunge was the substantial selloff in the US tech market. The Nasdaq Composite Index experienced a painful 2.43% drop on a single day, pushing it into correction territory. This index, primarily composed of technology stocks, has lost over 10.6% since the end of July, surpassing the 10% loss threshold associated with a market correction.

In summary, while Megaport demonstrated notable financial improvements, the limited customer growth and broader concerns about the tech sector contributed to the sharp decline in MP1 shares, with investors opting to sell off their holdings.

Megaport Limited saw a last price of AU$9.310, marking a significant decrease of AU$2.199 (-19.113%) with a total trading volume of 5,610,962 shares.

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