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For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Akamai Technologies (AKAM) ten years ago? It may not have been easy to hold on to AKAM for all that time, but if you did, how much would your investment be worth today?
Akamai Technologies' Business In-Depth
With that in mind, let's take a look at Akamai Technologies' main business drivers.
Headquartered in Cambridge, MA, Akamai Technologies Inc. is a global provider of content delivery network (CDN) and cloud infrastructure services.
The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Moreover, Akamai’s solutions allow customers to operate their web transactions anywhere anytime with cost-effective outsourced infrastructure and carry out predictable, scalable and secure e-business at low cost.
These solutions are built on the Akamai Intelligent Edge Platform, which is the technological platform for its business solutions and hosts some of the world’s best-known Internet brand names.
The company’s cloud optimization solutions help organizations to improve performance, increase availability and enhance the security of applications and key web assets delivered from data-centers to the end user.
Akamai’s platform comprises more than 250,000 servers located in over 1,500 networks around the world.
Akamai reported revenues of $3.198 billion in 2020.
The company reorganized its business into two main divisions — Media and Carrier (47.9% of total revenue in 2020) and Web Division (52.1%).
Notably, this marks a shift from the earlier product-focused structure to a new customer-focused one, which reports revenues derived from customers that are managed by the division.
Akamai markets and sells its services and solutions both domestically and internationally through direct sales and more than 100 active channel partners, including AT&T, Orange Business Services, IBM, Deutsche Telecom and Telefonica Group.
In 2020, the company derived 55.6% of its revenues from the United States, while the remaining 44.4% came from its foreign operations.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Akamai Technologies, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in May 2011 would be worth $3,452.68, or a gain of 245.27%, as of May 27, 2021, and this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 216.51% and the price of gold went up 19.85% over the same time frame.
Looking ahead, analysts are expecting more upside for AKAM.
Akamai is well-positioned to benefit from growth in Internet traffic and higher demand for cloud security solutions. Rising instances of cyberattacks is boosting demand for the company’s application-layer firewall and bot management services. Consistent momentum in adoption of Prolexic and Bot Manager services, Secure Web Gateway, and Page Integrity Manager are expected to bolster the company’s security business and drive the top line in 2021. However, travel-related costs are expected to increase as shelter-in-place guidelines ease, going ahead. The company anticipates traffic growth to begin to normalize and be in line with pre-pandemic rates, which remains a concern. Further, stiff competition in CDN market and escalating bandwidth costs are other headwinds. Shares have underperformed the industry in the year-to-date period.
Over the past four weeks, shares have rallied 5.12%, and there have been 9 higher earnings estimate revisions in the past two months for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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