Scalper1 News
Akamai Technologies ’ ( AKAM ) push into cloud and security services could offset challenges in its media business related to Apple ( AAPL ), Facebook ( FB ), Amazon.com ( AMZN ) and Microsoft ( MSFT ), says RBC Capital, which initiated coverage with a sector perform, or neutral, rating. RBC analyst Mark Mahaney set a price target of 62. Akamai stock was down a fraction, near 55, in midday trading in the stock market today . Shares have edged up about 4% in 2016 but are down 24% in the past 12 months. Cambridge, Mass.-based Akamai is the No. 1 provider of content delivery network (CDN) services to media and entertainment companies. Akamai’s CDN technology speeds up e-commerce transactions, business software downloads and video streaming to mobile devices. Akamai has expanded into higher-margin cloud infrastructure services and security, aiming to offset price cuts in the CDN business. “We believe the company can continue to see double-digit revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) growth driven primarily by cloud security and Web performance,” wrote Mahaney in a research report. “Excluding the company’s two largest media customers (presumably Apple and Facebook), we expect media delivery to remain in the very low double digits/very high single digits. “Given deceleration in revenue contribution from Akamai’s top two media customers (Apple and Facebook) in 2016, our estimates call for 9% year-over-year topline growth in 2016. The company would need to grow 20% over the next four years to reach its $5 billion target. This would be impressive acceleration. Management has pointed to (Internet video) volumes, international revenue and strategic M&A as the key levers to support this growth inflection.” Amazon Web Services, part of the e-commerce leader, is not yet a serious rival to Akamai, while Microsoft has partnered with Akamai, noted Mahaney. Microsoft and Amazon are Akamai customers, though both also operate commercial CDNs. “Microsoft and Akamai recently announced a partnership whereby (Microsoft’s) Azure CDN would leverage Akamai’s platform. Microsoft already uses Akamai for delivering software updates to the Xbox platform as well as updates to Office products, such as Windows 10 and Office 365,” Mahaney wrote. “Amazon’s use of Akamai is unknown, but since the company’s commercial CDN, AWS CloudFront, targets the low end of the market, we suspect Amazon leverages Akamai for large applications that have a high-performance standard and are delivered globally.” On Apple, Mahaney added: “We believe Akamai’s material OTT (over-the-top video) investments in 2015 targeted a potential Apple TV launch in Q4 2015 that never materialized. If Apple can make the economics work and moves forward with a new OTT offering, we expect Akamai will deliver a portion of this content.” IBD’s Internet-Network Solutions group ranks No. 88 out of 197 industry groups that IBD tracks. Akamai has a composite rating of 67 out of a possible 99. Image provided by Shutterstock . Scalper1 News
Scalper1 News