Akamai Technologies Will Deliver UpsideAKAM) recently announced third-quarter revenue of $551 million, up 11% year-over-year. Moving ahead, Akamai estimates fourth quarter of 2015 revenue to be in the range of $557 million to $577 million. Akamai also declared third-quarter non-GAAP net income of $112 million, slightly above $111 million of non-GAAP net income during the same period last year. The company has also provided earnings guidance for the fourth quarter of 2015 and forecasts earnings to be in the range of $0.60 to $0.64 per share.
Looking ahead, I believe that Akamai will be able to deliver a better financial performance due to a few simple reasons.
A look at the catalysts
Going forward, the Akamai Intelligent Platform is an advanced technology solution of Akamai that allows superior visibility, security, reliability, key expertise and broader reach with the reduced technology complexities and successfully meets the entire Akamai customer’s business requirements.
However, Akamai is increasingly facing tough competition from its peers Apple, Level 3 Communications and Verizon with their recent foray into the CDN technology vertical. The advanced Akamai Intelligent Platform is expected to drive significant profitability for the company with notable customer traction for the innovative product. Still, Akamai needs to continuously differentiate its product and technology services offerings to successfully exist in this market space amid rising competition.
However, Akamai has slashed its revenue and earnings guidance for the fourth quarter of 2015 due to the weaker online traffic expansion and the strengthening US dollar. Further, the worldwide content delivery network internet traffic is forecasted to expand at a CAGR of 38% during 2014 till 2019 and approximately 62% of global internet traffic is estimated to exceed CDN by fiscal year 2019 as against just 39% during 2014.
The recent decline in the stock prices seems only temporary and Akamai is believed to hugely benefit from the growing awareness among the enterprises for successfully evading the online threat and remaining updated in terms of security. Moreover, Akamai is focused on delivering outstanding shareholder returns through strategic share repurchases and timely dividend offerings.
Overall, investors are advised to make investments in Akamai Technologies considering its attractive valuation with trailing P/E and forward P/E ratios of 33.42 and 22.53, respectively. The PEG ratio of 1.94 indicates healthy company growth and comparable to the industry’s growth average of 1.25. The profit margin of 15.32% seems satisfactory. Moreover, Akamai has solid a balance sheet with significant total cash position of $667.85 million against weaker total debt of $619.36 million, which will allow it to make investments for growth going forward.
Published on Nov 6, 2015By Vinay Singh