Morgan Stanley Asks If It's Time To Buy The Dip In Akamai Technologies

Akamai Technologies, Inc. AKAM shares have declined 46.91 percent over the past six months, coming within 15¢ of the 52 week low on February 9.

Morgan Stanley’s Keith Weiss has maintained an Equal-weight rating on the company, with a price target of $60.

With better 4Q results and both the company and management raising their share buyback commitments, it appears to be the right time to buy the stock. However, Weiss prefers to wait for a pick-up in OTT.

According to the Morgan Stanley report, “While still decelerating, Q4 results showed Akamai with a better handle on the issues impacting growth, a stable Performance business, accelerating growth in the Security segment and a reigned in investment profile bringing margins and earnings in ahead of expectations.”

Analyst Keith Weiss believes that three factors could help stabilize the company’s top line growth profile and possibly also lead to reacceleration in top line growth.

These factors include “1) anniversarying the negative impacts of large customers moving to DIY, 2) several large media events like the Olympics aiding in overall volumes, and 3) an increasing contribution from the fast growing security segment – which has several upcoming new product launches,” Weiss stated.

Weiss also explained that historically, a reset of forward growth forecasts has been followed by investment in the stock. With the 2016 revenue expectations have been lowered by about 10 percent over the past two quarters, the present seems to present a “tactical opportunity” to buy Akamai shares.

However, Weiss prefers to take a more constructive stance, especially with regard to the longer term, once there is greater evidence of the potential of the Over-the-Top business to drive the media business or the security business scaling up to a level where it could impact the company’s earnings power more meaningfully.