Akamai Technologies Inc . (NASDAQ:AKAM) received a positive outlook from TD Cowen, with the firm raising its price target on the stock to $131 from $129, while retaining a Buy rating.
The adjustment, which comes on Friday, after Akamai reported better than expected second quarter results for the year 2024.
The company, known for its cloud service platform, has seen a significant increase in its 2024 revenue growth guidance for its Compute segment. Additionally, Akamai has raised its overall 2024 guidance for revenue, EBITDA, and Non-GAAP EPS.
Despite the challenges posed by slower growth in Delivery traffic, the company's management is successfully capitalizing on its strengths in Security and Compute.
TD Cowen's analyst highlighted Akamai's effective strategy, noting that the company's efforts to cross-sell and reinvest its cash have been fruitful. The firm's continued confidence in Akamai is based on the company's strong performance and strategic initiatives that appear to be paying off.
Akamai's upward revision in guidance signals a robust financial outlook and the potential for continued growth.
The company's focus on key growth areas like Security and Compute is part of a broader strategy to navigate through the slower growth in traffic delivery.
Akamai Technologies has seen a flurry of analyst activity. Guggenheim upgraded Akamai's stock from Neutral to Buy, setting a new price target at $128.00, reflecting confidence in the company's transition from a content delivery network to a diversified platform.
In contrast, KeyBanc reduced its price target for Akamai due to lower-than-expected Delivery segment revenues and foreign exchange headwinds, but maintained an Overweight rating.
Simultaneously, Scotiabank initiated coverage on Akamai with a Sector Outperform rating, citing strong prospects in security and edge computing. The firm anticipates these segments to become major revenue drivers for Akamai, potentially accounting for 75% of the business by 2025. Piper Sandler also maintained an Overweight rating on Akamai, highlighting growth in the company's new security packages and potential for future upselling in the enterprise compute segment.
InvestingPro Insights
Following the optimistic report from TD Cowen on Akamai Technologies Inc. (NASDAQ:AKAM), a deeper dive into InvestingPro data and tips can provide additional context for investors considering the stock. Akamai's management has been actively repurchasing shares, which can be a sign of confidence in the company's value (InvestingPro Tip). Additionally, the stock is currently trading at a low P/E ratio relative to near-term earnings growth, suggesting that it may be undervalued compared to its growth potential (InvestingPro Tip).
InvestingPro data shows Akamai with a market capitalization of $15.31 billion and a P/E ratio of 22.73, with a slight adjustment to 23.85 when looking at the last twelve months as of Q1 2024. The company's PEG ratio during this period is an attractive 0.72, indicating that the stock could be a good value relative to its earnings growth. Moreover, Akamai's revenue growth is solid, with a 7.78% increase in the most recent quarter of 2024 and a gross profit margin of 60.27% over the last twelve months as of Q1 2024. Despite a recent decline in stock price over the last six months, analysts predict the company will be profitable this year, which is corroborated by a positive return on assets of 6.91%.
Investors interested in Akamai should note that there are 9 additional InvestingPro Tips available, offering further insights into the company's financial health and market performance. For a more comprehensive analysis, visit https://www.investing.com/pro/AKAM.
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