On May 14, 2013, Zacks Investment Research upgraded Akamai Technologies Inc (AKAM) to a Zacks Rank #1 (Strong Buy). With a strong return of 55.4% over the past one year and a positive estimate revision trend, Akamai is an attractive investment opportunity.
Why the Upgrade?
Impressive first quarter results, continuing program wins from the likes of AT&T (T) and strong demand for cloud infrastructure solutions, security, mobile products and online video contributed to the upgrade.
Akamai reported first quarter results on Apr 24, 2013. Earnings of 42 cents per share were much better than the Zacks Consensus Estimate of 34 cents. This was the fourth consecutive quarter of positive earnings surprise with an average beat of 13.7%.
The better-than-expected earnings were primarily driven by a 15.2% surge in revenues and 80 basis points expansion in operating margin.
Based on the strong results, Akamai provided an optimistic guidance for the second quarter of 2013. Akamai expects revenues in the range of $368.0 million to $378.0 million (15.0% to 18.0% year-over-year growth), while earnings are expected to be between 44 cents and 46 cents per share for the forthcoming quarter.
The Zacks Consensus Estimate moved up 4 cents (12.1%) to 37 cents for the second quarter as 10 out of 11 analysts raised their estimates over the last 30 days. The Zacks Consensus Estimate includes stock-based compensation but excludes one-time expenses.
The Zacks Consensus Estimate for fiscal 2013 increased 15.1% to $1.60 per share as most of the estimates were revised higher over the last 30 days. For fiscal 2014, the Zacks Consensus Estimate increased 13.1% to $1.81 per share.
The long-term expected earnings growth rate for Akamai is 13.6%.
Other Stocks to Consider
Investors can also consider other Internet service providers that are doing well right now. These include Yahoo! (YHOO) and Facebook (FB). Both Yahoo! and Facebook carry a Zacks Rank #2 (Buy).
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