Guggenheim, DA Davidson Bullish On Akamai After Q4 Report

Akamai Technologies, Inc. AKAM reported above-consensus fourth-quarter results Tuesday and issued mixed 2019 guidance.

The Analysts

Guggenheim Securities analysts Robert Gutman maintained a Buy rating on Akamai with a $78 price target.

D.A. Davidson analyst Mark Kelleher reiterated a Buy rating and increased the price target to $96.

Guggenheim: Akamai Well-Positioned

Akamai's higher revenue, EBITDA and adjusted EPS were due to strength in the media and carrier division and ongoing strength in cybersecurity, Gutman said in a Wednesday note.

Margins expanded for the fifth straight quarter, and organic constant currency growth may have been 9.3 percent year-over-year — the best since Q1 2017, the analyst said.

Akamai's 2019 guidance suggests greater-than-expected revenue headwinds, but margin and EPS figures were higher than expected, Gutman said. 

"Net-net, we believe AKAM remains well-positioned, with the high-growth cloud security representing more than one-quarter of the business today" and growing organically in the mid-20-percent range year-over-year, the analyst said. 

DA Davidson: Akamai 'Doing A Good Job' 

Akamai is the leading provider of content delivery services and is leveraging its installed server base to build a rapidly growing services business, Kelleher said in a Wednesday note. 

With the easing of the revenue headwind created by competitive pressures on the media business due to insourcing by large customers and pricing pressure, gross, operating and EBITDA margins have expanded, the analyst said.

Kelleher said he expects the company to continue to reduce costs in its content delivery network business and invest in security offerings.

"We believe AKAM is doing a good job of holding its CDN/Media revenue flat while allowing its security business to thrive ($750M annual revenue run rate now)." 

As the contribution from the security business to total revenue rises from the current 26 percent, Akamai's overall revenue growth will accelerate, the analyst said. 

D.A. Davidson also took note of Akamai's announcement of a venture with Mitsubishi UFJ Financial to offer a blockchain-based online payment platform, Go Net, that's expected to launch in the first half of 2020. 

The Price Action

Akamai shares were up 1.89 percent at $70.64 at the time of publication Wednesday. 

Related Links:

Credit Suisse Downgrades Akamai, Projects 'Forthcoming Headwinds'

KeyBanc Upgrades Akamai Technologies As Focus Turns To Margin Expansion

Photo courtesy of Akamai.