Watch Akamai Technologies the Second Half of 2012
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the first quarter of this year, it appears Akamai Technologies (NASDAQ: AKAM) did quite well. On April 25, 2012, the company reported quarterly revenue of $319 million, which was an increase of 16% over the same period in the previous year. Commerce was the fastest growing market segment with an increase of 21% over the same quarter a year ago. Yet the stock plunged.
Here we have a company with a global market that will never slow down! Akamai earns revenues from the hosting and delivery of internet content and media from its client’s websites to end-users. If you have ever purchased something from Amazon (NASDAQ: AMZN), if you have ever downloaded a song, or upgraded your Microsoft operating system you have used Akamai's content delivery network to connect more safely and efficiently. It estimates that it delivers roughly 15% to 30% of all the traffic on the internet at any given time.
There were two concerns that appeared to overshadow the good news for the quarter. One was the announcement that the CEO would be stepping aside—the markets reacted to this. And the other thing is that Amazon announced an upgraded acceleration product to compete with Akamai.
This product by Amazon is by no means new. Amazon’s “CloudFront” has always been less expensive than Akalmai and for this reason not as fast. CloudFront found a place in the market for a small company that needs a cheap, pay-as-you-go model. The pay-as-you-go pricing, with no upfront minimums are excellent for SMBs, or larger price conscious organizations. But the upgrade has made it faster. Looking to expand and use a big chunk of the web, Amazon’s rolled adds functionality and speed at its current low rates. It claims a businesses applications are now faster and more responsive, regardless of where one’s users are located. How much will this bite into Akamia’s strong hold?
These are just reactionary moves on the part of the marketplace. Amazon will find its nich market. Akamai has already consumed one of its major competitors when it purchased Cotendo. Its new leading cloud platform will deliver secure, high-performing user experiences to any device, anywhere. Specifically designed for public cloud providers, can help make it easier for hosted storage.
The company will continue to move up. Janney Capital’s analyst Richard Fetyko upped his rating on the content delivery network’s shares to Buy from Hold, with a new target of $35, up from $33. Akamai’s cloud segment revenue growth should accelerate in the 2012 second half. So it may be a good time to buy!
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