Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Friday, BofA Securities analysts adjusted their stance on Akamai Technologies (NASDAQ: NASDAQ:AKAM), lowering the stock from Buy to Neutral and reducing the price target to $100 from the previous $125. The revision comes as analysts anticipate limited near-term growth catalysts for the company, which is currently shifting its focus from slower-growing segments to more dynamic markets. The company, currently valued at $14.78 billion, trades at a P/E ratio of 28.3x, which InvestingPro analysis indicates is relatively high compared to its near-term earnings growth potential.
The reason behind the downgrade, as stated by the analysts, is the transition Akamai is undergoing—from areas such as web security and legacy compute to emerging sectors like API security and Cloud Infrastructure Services (CIS). While BofA Securities maintains a positive outlook on Akamai’s long-term prospects, they note that such transitions require time. Despite the current challenges, InvestingPro data shows the company maintains a "GOOD" overall Financial Health Score, with revenue growing at 4.7% over the last twelve months. Management has shown confidence in the company’s future by actively buying back shares.
The new price objective set by BofA Securities is based on a 16x multiple of the company’s projected CY26 earnings per share, a decrease from the 18x multiple previously applied to CY25 estimates. This adjustment aligns with the company’s muted fiscal year 2025 guidance, which indicates an expected growth of 3% compared to the 7% consensus estimate.
The revised guidance suggests that the current year is likely to be a transitional phase for Akamai. The BofA Securities analysts’ comments highlight the challenges and patience required as the company navigates this period of change and reorientation towards higher growth areas.
Investors and market watchers will be keeping a close eye on Akamai’s strategic moves and its ability to capitalize on the high-growth opportunities presented by API security and Cloud Infrastructure Services. According to InvestingPro Fair Value analysis, the stock appears slightly undervalued at current levels, suggesting potential upside for patient investors. As the company works through this pivotal transformation, the updated rating and price target from BofA Securities serve as indicators of the cautious optimism surrounding Akamai’s future. For deeper insights into Akamai’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Akamai Technologies reported fourth-quarter earnings that exceeded analyst expectations, with adjusted earnings per share reaching $1.66 compared to the anticipated $1.52. The company also reported revenue of $1.02 billion, slightly above the projected $1.01 billion, marking a 3% year-over-year increase. Despite these positive results, Akamai’s guidance for the first quarter and full year 2025 fell short of expectations, with Q1 earnings per share forecasted at $1.54-$1.59 and revenue guidance of $1-1.02 billion, both below consensus estimates.
Raymond (NSE:RYMD) James and Evercore ISI both adjusted their price targets for Akamai, with Raymond James lowering it to $110 while maintaining an Outperform rating, and Evercore ISI reducing it to $105, also keeping an Outperform rating. These adjustments came after Akamai’s December-quarter results, which showed robust earnings despite concerns about potential disruptions from significant customers like ByteDance. Piper Sandler, however, downgraded Akamai from Overweight to Neutral, reducing the price target to $100, citing concerns about the company’s long-term guidance and growth in core segments.
Akamai’s revenue composition has shifted, with over two-thirds now coming from its compute and security segments, which saw growth of 25% and 14%, respectively. The company is focusing on these areas as part of its strategic direction, though concerns remain about declining margins and the need for increased capital expenditures. Analysts from Piper Sandler pointed out that the fastest-growing parts of Akamai’s business still represent a small fraction of overall revenue, adding to the cautious outlook. Despite the challenges, Akamai continues to adapt its strategy, emphasizing security and compute to align with market demands.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.