Akamai pushes north with big share gains
SAN FRANCISCO (MarketWatch) --
In afternoon trading, Akamai (AKAM) held on to a gain of $6.34 a share, or more than 22%, to reach $34.53 in the wake of its late-Wednesday report and forecast.
Akamai has benefited from the growth in cloud-based computing and services. The company makes equipment and software that its customers use to improve the delivery of video and other content online.
During its fiscal-second quarter, the company reported a profit of $44 million, or 24 cents a share, on revenue of $331 million, compared with earnings of $48 million, or 25 cents a share, on $319 million in sales in the year-ago period.
While Akamai's earnings slipped, once one-time items were excluded Akamai would have earned 43 cents a share and beat the estimates of analysts surveyed by FactSet Research, who forecast the company to earn 37 cents a share on $326.2 million in revenue.
Raymond James analyst Michael Turtis, in a research note, said the results showed Akamai delivering a strong quarter, with business improving in its cloud and content-delivery areas. "Akamai is executing well in a tough environment and benefitting from what for now seems like stable price declines, accelerating volumes, and less competition," Turtis said.
Colby Synesael, of Cowen & Co., said Akamai's results "should neutralize much of recent investor skepticism" around the company's stock of late. Prior to Thursday's post-earnings gains, Akamai shares had fallen 12.5% this year.
Akamai also helped its case by forecasting a third-quarter profit of 40 cents to 42 cents a share, on revenue in a range of $332 million to $342 million, while analysts had forecast Akamai to earn 38 cents a share on $331.2 million in sales.
However, Chad Bartley, an analyst with Pacific Crest Securities, remained skeptical about Akamai's ability to maintain its high-growth levels.
Bartley called Akamai's forecast "strong", but said that in order for him to become more positive on Akamai,"We need confidence the increase in growth is more than a function of easy comparisons and that the trends are sustainable." Bartley has a sector perform, or neutral, rating on Akamai's stock and said a "fair value" for the company's shares remains in the $33 to $35 range.
Also, Turtis, who was mostly upbeat about Akamai, wasn't ready to get too exited about the company's bullish outlook.
"The risk around Akamai's improving forecast remains high," Turtis said, noting that although Akamai's cloud-computing business is improving it's still not showing the sustained growth it needs in order to offset "the volatility and ever-present risk of another step down in competitive pricing in the content business.'
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