Tag Archives: akam

Netflix, Amazon, Akamai Benefiting From Cable Cord-Cutters

Interest in cable TV cord-cutting and cord-shaving is on the rise, according to a new survey by Robert W. Baird & Co. In its semiannual video trends survey, 51% of respondents said they are considering canceling or reducing their pay TV service. That’s up from 47% in Q3 2015 and 46% a year ago, Baird analyst William Power said in a research note Wednesday. “Consistent with our past surveys, price remains far and away the No.1 dissatisfaction with traditional cable service, followed by streaming alternatives and paying for more channels than you need, all of which feed the OTT (over-the-top TV) opportunity,” Power said. Netflix ( NFLX ) remains the clear leader in the Internet streaming-video market, but Amazon.com is gaining fast, Power said. Almost half of Netflix subscribers said they view Netflix as a substitute to traditional TV, though 82% of Netflix subscribers still subscribe to cable or satellite. Survey respondents picked “Orange Is the New Black” as the most-watched Netflix original show, followed by “House of Cards,” “Making a Murderer,” “Daredevil” and “Narcos.” Baird surveyed 1,300 U.S. Internet users, which skewed the results toward younger consumers. Roughly 15% of those surveyed were cord-cutters or cord-nevers who didn’t subscribe to traditional pay TV services. “Due in part to the online nature of our survey and its bias toward a younger demographic, Netflix penetration of 75% of respondents is much higher than Netflix’s actual U.S. household penetration of close to 50%, and we expect Amazon ’s ( AMZN ) penetration of 52% of our sample is also significantly higher than actual,” Power said. Netflix penetration in the first quarter was unchanged from the Q3 2015 survey. But the Amazon Prime subscriber rate of 52% was up from 45% six months ago, Baird said. Akamai Technologies ( AKAM ), a leading enabler of streaming services, “should be well positioned to benefit from increased streaming,” Power said. Power rates Netflix stock neutral and Akamai stock outperform. He does not have a rating on Amazon. Akamai stock rose 2.1% Wednesday and Netflix stock rose 1.5%, while Amazon shares fell a fraction.

Akamai Says M&A, Stock Buyback Both Do-able

Akamai Technologies ( AKAM ) is sticking with its revenue target of $5 billion by 2020-21. At its investor day on Monday, the company said that it has enough cash to pursue stock repurchases as well as acquisitions. “We could do both — M&A or share buybacks,” said Akamai CFO Jim Benson. He said that Akamai has about $1.5 billion in cash. Akamai did not change Q1 guidance calling for profit in a range of 61 cents to 64 cents per share and revenue of $562 million at its midpoint, up 7% from $526.5 million a year earlier. Akamai’s 2015 revenue rose 12% to $2.2 billion. “Although Akamai expects a lower overall growth rate for 2016, management is maintaining its long-term revenue goal of $5 billion by 2020, which implies a CAGR (compound annual growth rate) of 18%,” said Jim Breen, a William Blair analyst, in a report. Cambridge, Mass.-based Akamai is the biggest provider of content delivery network 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 that averages 15% to 20% a year. At the investor day in Boston, Akamai said that it expects to grow sales overseas as well as to corporate customers. “The media business was de-emphasized relative to last year and is beginning to be overshadowed by the performance and security businesses,” said Michael Bowen, an analyst at Pacific Crest Securities, in a report. Akamai’s stock is up about 4% in 2016. It has an IBD Composite Rating of 59 out of a possible 99. Akamai competes with Limelight Networks ( LLNW ) and Level 3 Communications ( LVLT ) as well as Verizon Communications ( VZ ). Verizon carries a high Composite Rating of 98 and makes  IBD’s Big Cap 20 weekly screen of large-cap growth stocks.

Akamai Stock Jumps On Q1 Beat, Despite Apple, Facebook Trend

Akamai Technologies ( AKAM ) stock jumped Wednesday after the CDN services provider late Tuesday reported Q1 earnings and revenue that topped analysts’  lowered expectations and gave in-line current-quarter profit  guidance. Shares of Cambridge-based Akamai were up 23% in midday trading in the stock market today , near 49. Akamai is the biggest provider of content-delivery network (CDN) services to media and entertainment companies. Akamai said it earned 72 cents per share in Q4, up 3% from the year-earlier period, with revenue rising 8% to $579.2 million. Analysts had modeled EPS of 62 cents and revenue of $569 million. The beat included a 6-cent tax benefit. Akamai bought back $100 million in its own stock, lowering share count and boosting EPS. Even with Wednesday’s gain, Akamai stock is down 7% in 2016. The stock had plunged 47% through Tuesday’s market close since Oct. 27, when the company  gave disappointing December-quarter guidance. For the current quarter, Akamai forecasts revenue of $562 million at the midpoint of its range, with adjusted EPS of 61 cents to 64 cents, vs. consensus estimates of $568 million and 63 cents. Full-year 2015 revenue rose 12% to $2.2 billion. On the company’s earnings conference call, management backed off of its 2020 revenue goal of $5 billion, said Colby Synesael, an analyst at Cowen & Co., in a research note.   Akamai’s technology speeds up video streaming to mobile devices, e-commerce transactions and business software downloads. Akamai has expanded into higher-margin cloud-infrastructure services and security, aiming to offset price cuts in the CDN business that average 15% to 20% a year. “The security segment, now at a $300 million (annual revenue) run rate, provided the (Q4) upside,” said UBS analyst Steven Milunovich in a report. Akamai’s stock has been pressured as some big customers shift to their own internal CDNs. Apple ( AAPL ), believed to be Akamai’s biggest customer, and Facebook ( FB ) have been moving data traffic to their own CDNs. Akamai has renegotiated contracts and lowered prices in some cases, says Tim Horan, an analyst at Oppenheimer. “The top two customers (likely Apple/Facebook) represented an average of 13% of revenue and likely closer to 11% in Q4, but that should decrease to 6% by mid-2016,” wrote Horan in a report. “The next two (likely Microsoft ( MSFT )/Google) likely represent 5% and have likely re-priced. This should result in less revenue volatility in the second half of 2016, with upside if overall traffic volumes pick up.” Google is the main business of Alphabet ( GOOGL ).   He says Akamai could gain from video streaming tied to the Olympics this summer, the presidential election and National Football League games. Aside from longtime rivals Level 3 Communications ( LVLT ) and Limelight Networks ( LLNW ), Akamai is facing increased competition from Amazon Web Services, part of Amazon.com ( AMZN ), as well as Verizon Communications ( VZ ).