Akamai Technologies, Inc. (NASDAQ:AKAM) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 3.6% to hit US$795m. Akamai Technologies also reported a statutory profit of US$0.98, which was an impressive 25% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Akamai Technologies from 20 analysts is for revenues of US$3.16b in 2020 which, if met, would be a credible 3.8% increase on its sales over the past 12 months. Statutory earnings per share are predicted to accumulate 3.0% to US$3.44. Before this earnings report, the analysts had been forecasting revenues of US$3.11b and earnings per share (EPS) of US$3.37 in 2020. So the consensus seems to have become somewhat more optimistic on Akamai Technologies' earnings potential following these results.
The consensus price target rose 6.2% to US$121, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Akamai Technologies at US$153 per share, while the most bearish prices it at US$70.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Akamai Technologies' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Akamai Technologies' revenue growth will slow down substantially, with revenues next year expected to grow 3.8%, compared to a historical growth rate of 7.1% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Akamai Technologies.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Akamai Technologies' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Akamai Technologies going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Akamai Technologies you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.