JPMorgan Remains Neutral On Akamai Heading Into Q1 Results

Although Akamai Technologies, Inc. AKAM reported robust results for the previous quarter, driven by strong online holiday sales, JPMorgan’s Sterling Auty believes the March quarter numbers will reflect the current state of the company’s business better.

Auty maintains a Neutral rating on the company, with a price target of $60.

Seasonality And Estimates

Given the five-year average sequential growth trends for Akamai Technologies’ revenue, as well as the revenue losses from the company top two media customers, the quarterly revenue growth estimate has been revised by 1 percent quarter-on-quarter for 2Q16, 2 percent for 3Q and 6 percent for 4Q.

Related Link: CEO Leighton Buys 19,546 Shares Of Akamai Technologies @$51.15/Share -Form 4

Revenue Categories

“We expect Media Delivery revenue to normalize after the impact from top-2 customers is taken out of the equation by September, leading to increase in 4Q Media revenue after a relatively flat 3Q16.” Auty mentioned.

For the full year, the analyst expects Media revenue to decline 2 percent year-on-year, with a 6 percent year-on-year increase in total revenue.

According to the JMorgan report, “At the analyst day in March 2016 AKAM restated the segment revenues from Media and Performance & Security for 2014-2015, re-grouping DSA revenue out of Media into Security & Performance.”

Auty believes this was the right move, since DSA revenue should have been part of the Security & Performance category from the start.

Auty also expects Akamai Technologies to provide an update on the changing competitive landscape.