AKAM : NASDAQ : US$47.68
Akamai provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet, ranging from live and on-demand streaming videos to conventional web content, to c-commerce tools. The company is headquartered in Cambridge, Massachusetts.
All amounts in US$ unless otherwise noted.
ANOTHER SOLID QUARTER EXPECTED; VOLUME GROWTH TO HELP OFFSET REPRICE IMPACT
We maintain our BUY rating and $56 price target ahead of its seasonally-strong Q4 report that is also expected to be potentially impacted by the “catch up” contract repricing with its largest customer. Despite this well-articulated headwind, we continue to expect another solid quarter report as we believe the potential drag has been well reflected in investor expectations and that organic growth from favorable secular trends will more than offset the negative impact over time.
Solid CDN traffic growth expected – With the majority of the software downloads for the initial iOS7 and subsequent updates expected to have occurred in Q4/13, we expect the traffic growth for the Media Delivery Solutions business to be strong in the quarter. Combined with the continued proliferation of over-the-top video traffic growth, we believe the company will deliver another quarter with robust traffic growth of the traditional CDN business.
Security, e-commerce continue to benefit – As the consumer holiday purchases continue to shift towards mobile and other online venues, we believe the growth in Akamai’s e-commerce business will remain strong as the company facilitates fast and secure online transactions with its massive infrastructure and optimization software. Performance & Security business will also benefit from the continued IT outsourcing trends as enterprises increasingly focus on performance and reliability in their cloud migration.
Temporary speed bump provides opportunity – Despite investor concerns due to a large contract re-pricing, we believe Akamai remains a unique asset well positioned to benefit from multiple favorable secular trends (mobile, cloud, online video and security). As such, recent volatility creates an opportunity to accumulate its share, in our view