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Valued at a market cap of $13.1 billion, Akamai Technologies, Inc. (AKAM) is a leading provider of content delivery, cloud computing, and cybersecurity solutions. The Cambridge, Massachusetts-based company enables faster, secure, and reliable digital experiences through video streaming, application security, and cloud optimization services.
Shares of Akamai Technologies have significantly underperformed the broader market over the past 52 weeks. AKAM has dipped 22.6% over this time frame, while the broader S&P 500 Index ($SPX) has gained 29.5%. In 2024, shares of AKAM are down 26.4%, compared to SPX’s 23.4% increase on a YTD basis.
Narrowing the focus, AKAM has also lagged behind the Technology Select Sector SPDR Fund's (XLK) 23.8% return over the past 52 weeks and a 19.3% YTD gain.
Despite Akamai meeting Q3 adjusted EPS and revenue estimates on Nov. 7, its shares tumbled 14.4% the next day due to weaker-than-expected Q4 revenue guidance of $995 million to $1 billion, falling short of analysts' estimate. This shortfall was attributed to a pullback in client spending amid macroeconomic uncertainty, higher interest rates, and inflation, particularly impacting its cloud and content delivery services. Additionally, concerns were heightened by slowing traffic growth, the continued impact of a major social media customer's cost-cutting measures, and lower-than-anticipated Q4 adjusted EPS guidance of $1.49-$1.56 compared to analysts' forecast.
For the current fiscal year, ending in December, analysts expect AKAM’s EPS to decline 2.9% year-over-year to $4.31. The company’s earnings surprise history is mixed. It met the consensus estimates in one of the last four quarters while missing on three other occasions.
Among the 18 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 12 “Strong Buy” ratings, one “Moderate Buy,” four “Holds,” and one “Strong Sell.”
This configuration is slightly less bullish than three months ago, with 13 “Strong Buy” ratings on the stock.
On Nov. 12, Baird lowered its price target for AKAM to $115 while maintaining an “Outperform" rating, citing in-line Q3 revenue and a weaker Q4 outlook due to delivery headwinds. Despite these challenges, the firm highlighted double-digit growth in Akamai's security and computing segments, which is expected to persist into 2025.
The mean price target of $114.76 represents a premium of 31.8% to AKAM’s current levels. The Street-high price target of $140, implies a potential upside of 60.8% from the current price.
