Akamai Technologies Faces Tough Market Headwinds
With a market capitalization of $13.1 billion, Akamai Technologies, Inc. (AKAM) stands out as a major player in content delivery, cloud computing, and cybersecurity. The company, located in Cambridge, Massachusetts, provides essential services that enhance digital experiences through faster video streaming, secure applications, and optimized cloud solutions.
The stock performance of Akamai has lagged behind the overall market in the past year. Over the last 52 weeks, AKAM has decreased by 22.6%, in stark contrast to the broader S&P 500 Index’s ($SPX) 29.5% increase. Year-to-date in 2024, AKAM shares have dropped 26.4%, while the S&P 500 has risen by 23.4%.
Upon closer examination, AKAM trails the Technology Select Sector SPDR Fund’s (XLK) 23.8% return over the same timeframe and a 19.3% YTD increase.
Akamai’s shares fell sharply by 14.4% on November 8, despite the company meeting its adjusted EPS and revenue estimates for Q3 on November 7. Investors reacted negatively to weaker-than-expected revenue guidance for Q4, projected between $995 million and $1 billion, which was below analyst forecasts. This revenue shortfall is primarily due to a reduction in client spending linked to economic uncertainty, elevated interest rates, and inflation—especially affecting its cloud and content delivery services. Concerns also arose from slow traffic growth, ongoing budget cuts from a significant social media client, and adjusted EPS guidance falling below expectations at $1.49-$1.56.
Analysts anticipate a 2.9% decline in EPS for the current fiscal year, which ends in December, bringing it to $4.31. Recently, Akamai has had a mixed record in meeting earnings expectations, achieving consensus estimates in just one of the last four quarters while missing in three.
Analyst Opinions and Future Outlook
Currently, out of 18 analysts monitoring AKAM, the consensus rating is a “Moderate Buy.” This assessment includes 12 “Strong Buy” ratings, one “Moderate Buy,” four “Holds,” and one “Strong Sell.” This sentiment is slightly less favorable than three months ago, when there were 13 “Strong Buy” ratings.
Following the latest earnings report, Baird adjusted its price target for AKAM to $115, while keeping an “Outperform” rating. This adjustment stems from steady Q3 revenue performance paired with concerns regarding Q4 challenges. Notably, the firm highlighted that Akamai has shown double-digit growth in both its security and computing sectors, which are expected to continue into 2025.
The average price target of $114.76 indicates a potential upswing of 31.8% compared to current prices. The highest target observed on Wall Street is $140, suggesting an impressive upside of 60.8% from the existing share price.
On the date of publication, Sohini Mondal did not hold any positions in the securities mentioned in this article. All information and data presented here are for informational purposes. Please view the Barchart Disclosure Policy for further details.
The views expressed in this article are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
