Akamai (AKAM) Shows Momentum: Is It Part of Your Portfolio?
Akamai Technologies Inc.’s AKAM stock has been trending, of late. Strong fundamentals and robust second-quarter results have placed the stock in investors’ good books.
Shares of Akamai have gained 48.8% on a year-to-date basis, against the industry’s decline of 1.8%. The company’s impressive price performance can be attributed to its impressive earnings surprise history. The company surpassed earnings estimates in the trailing four quarters, with an average earnings surprise of 8.5%.
Analysts also seem to be optimistic about the company’s prospects as the stock is witnessing upward estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for 2019 and 2020 earnings has moved upward by 1 cent for each year to $4.27 per share and $4.71 per share, respectively. Backed by these upward estimate revisions, the company currently carries a Zacks Rank #2 (Buy).
Let’s delve deeper and analyze the factors which make Akamai a solid pick.
Growth Drivers
Robust performance of cloud security business, strong traffic in OTT video vertical and media business, and operational efficiency are key catalysts. Solid demand for Kona Site Defender, Nominum services, Bot Manager and Prolexic Solutions are other positives.
Synergies from the Nominum acquisition (completed in November 2017) are enabling the company to enhance the Enterprise Threat Protector solution, and expand presence among carrier and enterprise customers.
Most recently, the company acquired KryptCo, a security startup that builds mobile-based authentication technology, in order to strengthen presence in the zero trust ecosystem.
With the joint Akamai-KryptCo solution, organizations can commence adoption of a zero trust security model. Moreover, organizations can further enhance security features and mitigate phishing incidents on devices. This buyout will aid Akamai to deliver on its commitment of safeguarding customer data while focusing on people-centric secure enterprise IT approach.
Growing influence of the company’s security solutions among media customers is also noteworthy. Akamai has rolled out Enterprise Defender in an effort to enable customers in malware prevention and secure app access across multiple cloud platforms.
Moreover, Akamai is benefiting from robust adoption of its Intelligent Edge Platform. The company has also announced that Hotstar, a notable streaming platform of India, utilized Intelligent Edge Platform to enable viewers stream Vivo IPL and recorded notable viewership.
Strong demand for High Definition video over the Internet is driving bandwidth requirements, thereby accelerating demand for the company’s solutions and aiding revenues. Markedly, Akamai integrated its content delivery network (CDN) with Microsoft’s MSFT Azure services to make it easier for media organizations to build video offerings in cloud and monetize the same.
Notably, per a ResearchAndMarkets report, the Global Cloud Security market is expected to hit $241.1 billion by 2025 at a CAGR of 11% from the current year.
We believe Akamai is well poised to make the most of this opportunity by strengthening its cloud security portfolio through acquisitions and partnerships.
Raised 2019 View Holds Promise
Akamai revised guidance for 2019 on growing clout of streaming services and increasing adoption of security solutions.
The company expects full-year 2019 revenues in the range of $2.84-$2.87 billion, compared with previously predicted range of $2.82-$2.86 billion. The Zacks Consensus Estimate for revenues is pegged at $2.86 billion.
Non-GAAP earnings are now projected to be between $4.23 and $4.30 per share, compared with earlier guided range of $4.05-$4.20. The current Zacks Consensus Estimate is pegged at $4.27.
Bottom Line
A successful investor understands the importance of adding well-performing stocks in the portfolio at the right time. Indicators of a stock's bullish run include a rise in share price and strong fundamentals.
Taking all the pros into consideration, Akamai is a lucrative investment option at the moment.
Other Key Picks
Some other top-ranked stocks in the broader technology sector are Keysight Technologies Inc. KEYS and Synopsys, Inc. SNPS, both flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Keysight and Synopsysis currently pegged at 10% and 12%, respectively.
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