Akamai Technologies



Target: US$68.00 

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

Investment recommendation
Akamai reported 3Q14 results after the close that once again exceeded
expectations even though the quarter appeared to lack of a meaningful
benefit from the company’s largest customer who released a new
software application in the quarter that was responsible for such strong
volume and revenue growth in 3Q13. Once again Akamai has managed
to defy logic and manage the transition of traffic from large scale
customers who decided for the do-it-yourself option. Akamai again
demonstrated its ability to participate in the dramatic growth of Internet
volumes and increasingly important security applications at a time when
large volumes of traffic are being redirected to direct-connect paid
peering arrangements between content providers and ISPs. We believe
growth will remain strong for Akamai, especially in its media segment.
We retain our BUY rating and $68 price target.

Investment highlights

 Solid quarter and outlook – We believe the 3Q14 report that was
above expectations is the direct result of the demand for the
company’s industry-leading services in the face of intense
competition. We expect it will continue in 2015.
 Outlook in line with expectations – Despite the better-than-expected
3Q14, guidance for 4Q14 is essentially in line with expectations
which might imply that we have not fully worked through the
aforementioned large customer transition.
 Solid valuation – With continued strong double-digit growth
expected with the secular tailwinds, we believe our $68 target
remains reasonable.


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