On Friday, Akamai Technologies (NASDAQ:AKAM) experienced a revision in its stock outlook as DA Davidson adjusted its price target for the company. The new target is set at $115.00, down from the previous $125.00, while the firm maintained a Buy rating on the stock.
The adjustment follows Akamai's first-quarter performance, which revealed a strong showing in the Security and Compute segments, with Compute expected to grow by 21-23% year-over-year at constant currency (CC) in the calendar year 2024, an increase from the previously forecasted 20%. Security growth projections remain unchanged, with a 14-16% year-over-year increase expected organically at CC, excluding a one-point contribution from a recent acquisition referred to as Noname.
Despite these positive aspects, the Delivery segment's performance was notably weaker, with expectations now set for a year-over-year decline of 15-16% organically at CC, a significant drop from the prior forecast of an 8-9% decrease. This downturn in Delivery has led to a downward revision of operating margins (OMs) by approximately 70 basis points at constant currency, excluding the 50 basis points impact from Noname.
DA Davidson's analyst cited the Delivery segment's downturn as "much worse than we could have imagined." Nevertheless, the firm remains optimistic about Akamai's future, emphasizing the company's attractive long-term business shift and the continued acceleration in the Compute segment. Despite the lowered price target, the Buy rating indicates a continued positive outlook on the company's stock.
InvestingPro Insights
As Akamai Technologies (NASDAQ:AKAM) navigates market dynamics, the latest InvestingPro data provides a deeper look into the company's financial health and stock performance. With a market capitalization of $15.7 billion and a P/E ratio that has adjusted to 24.21 from the last twelve months as of Q1 2024, Akamai shows signs of a company that holds investor confidence. The company's revenue growth remains robust, with a 7.01% increase over the last twelve months as of Q1 2024, reflecting its ability to expand in a competitive market.
InvestingPro Tips highlight that Akamai's management has been actively buying back shares, which could signal their belief in the company's value and future prospects. With liquid assets exceeding short-term obligations and cash flows that can sufficiently cover interest payments, Akamai stands on solid financial footing. Moreover, analysts predict that the company will remain profitable this year, a sentiment backed by Akamai's performance over the last twelve months. For investors looking for stability, Akamai's stock generally trades with low price volatility, which may be appealing for those with a preference for less turbulent investments.
For those considering a deeper dive into Akamai's investment potential, InvestingPro offers additional insights and metrics. By using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable analysis. With 7 additional tips available on InvestingPro, investors can make more informed decisions about their portfolio. Remember, InvestingPro Fair Value estimates the stock's worth at $119.52, which is below the analyst target of $130 but above the current price, suggesting room for growth.
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