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Akamai's Q3 Beat Prompts SunTrust To Turn Bullish

Akamai's Q3 Beat Prompts SunTrust To Turn Bullish

A bullish case for can be made for Akamai Technologies, Inc. (NASDAQ: AKAM) after the tech company's third-quarter earnings beat Monday, according to SunTrust Robinson Humphrey. 

What Happened

Akamai said it earned 94 cents per share in Q3 on revenue of $670 million versus expectations of 83 cents per share and $664.46 million. By segment, web division revenue rose 8 percent from a year ago to $357 million and media and carrier division revenue rose 6 percent to $313 million.

Net income for the quarter rose 68 percent from a year ago to $181 million, while the non-GAAP operating margin improved percentage points from a year ago to 27 percent. Q3 marks the fourth consecutive quarter of non-GAAP operating margin improvement, and Akamai remains on track to hit its 30-percent margin goal in 2020, the company said. 

Why It's Important

SunTrust Robinson Humphrey's Greg Miller upgraded Akamai from Hold to Buy with a price target lifted from $78 to $82. The analyst cited three key takeaways from Q3 that warrant a bullish stance. (See his track record here.)

  • Despite foreign exchange woes, the company reported better-than-expected revenue growth, with notable strength in cloud security and stability in top customers.
  • Management's "exceptionally strong" expense control helped generate a profit beat, with reason to believe more improvements can be made over the years.
  • Akamai spent more than expected on share repurchases in Q3 and appears to be on track to hit its $750-million authorization by the end of the year.

What's Next

Akamai is well-positioned with a mix of products and offering to take advantage of ongoing growth trends in the following categories, Miller said:

  • Over-the-top video.
  • Online gaming.
  • Growing demand for cloud security products.

Related Links:

DA Davidson Upgrades Akamai: 'Revenue From New Products Has Tripled In Just The Last Year'

Credit Suisse Downgrades Akamai, Projects 'Forthcoming Headwinds'

Photo courtesy of Akamai. 

Latest Ratings for AKAM

Mar 2021KeyBancUpgradesSector WeightOverweight
Feb 2021Craig-HallumDowngradesBuyHold
Feb 2021Credit SuisseMaintainsNeutral

View More Analyst Ratings for AKAM
View the Latest Analyst Ratings


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