A JPMorgan analyst is upbeat on Akamai Technologies, Inc. AKAM after the company acted upon a recommendation from activist investor Elliott Management.
Analyst Sterling Auty upgraded shares of Akamai from Neutral to Overweight and increased the price target from $75 to $90, suggesting roughly 20-percent upside.
Akamai is doing the right thing by embracing strategies proposed by Elliott Management, including focusing on margin improvement, cyber security and capital return, Auty said in a Friday note.
JPMorgan expects Akamai's Media Division revenues to benefit from increasing OTT and vMVPD content, along with higher 4K content, in 2019 and 2020. Negative catalysts from contract renewals with lower prices are already factored into the 2018 guidance, offering scope for growth expansion in 2019 and 2020, Auty said.
Cloud Security is key for the company, with Auty's research indicating a strengthening competitive position, he said. JPMorgan projects a clear path to revenue acceleration for Akamai in 2019 and 2020.
The research firm expects 9-cent-per-share accretion to 2018 EPS from the $750-million stock repurchase planned this year. A 30-percent operating margin and stock repurchase will lead to earnings per share of $4.62 in 2020, Auty said.
The Price Action
Akamai shares are up about 18 percent over the past year.
Photo courtesy of Akamai.
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