Guggenheim, KeyBanc Remain Akamai Bulls After Q1 Beat

Akamai Technologies, Inc. (NASDAQ: AKAM) reported first-quarter results Tuesday that came in better than expected and prompted two Street analysts to reaffirm their bullish stances.

The Analysts

Guggenheim's Robert Gutman maintains a Buy rating on Akamai Technologies with an unchanged $85 price target.

KeyBanc Capital Markets' Brandon Nispel maintains at Overweight with a price target lifted from $80 to $91.

Guggenheim: 5 Key Takeaways

Akamai delivered a beat across all estimates, and the company upwardly revised its full-year outlook, Gutman said in a Wednesday note.

The analyst named five main takeaways from the report:

  • The Media and Carrier segment continued to outperform, as revenue came in at $330.2 million versus estimates of $315.9 million.

  • LIP revenue grew on a year-over-year basis for the first time since 2015.

  • Management security revenue growth excluding the early 2019 acquisition of Janrain was 26.3 percent and consistent with management's guidance in the mid-20s range.

  • The non-GAAP operating margin "spiked" to 30 percent in the quarter.

  • Management is focused on increasing network development ahead of multiple over-the-top launches in the back half of 2019.

Guggenheim's $85 price target implies upside potential of just 6 percent, Gutman said, adding that a bullish stance nevertheless remains justified given the upside potential from an acceleration in traffic growth from new OTT services.

The company's new security services are still in the early phase of adoption, the analyst said.

KeyBanc Sees Growing Sentiment Into 2020

Akamai revised its 2019 guidance higher as it faces opportunities to address the growing number of streaming video services set to launch in the near-term, Nispel said in a Tuesday note.

This creates a scenario where 2020 could be a year of superior growth due to the Summer Olympics and the 2020 U.S. presidential election cycle, the analyst said.

View more earnings on AKAM

Investor sentiment is likely to improve moving into next year and support a higher valuation for Akamai stock, Nispel said. This in part supports an incrementally higher price target on the stock of $91, he said.

The target is based on 11.2 times the 2020 adjusted EBITDA estimate and represents a premium versus the stock's historical average of 10 times, according to KeyBanc.

Price Action

Akamai shares were up 2.55 percent at $82.10 at the time of publication Wednesday.

Related Links:

Guggenheim, DA Davidson Bullish On Akamai After Q4 Report

KeyBanc Finds Multiple Reasons To Turn Bullish On Akamai Technologies

Photo courtesy of Akamai.

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