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On Friday, Citi analyst Fatima Boolani revised the price target on Akamai Technologies (NASDAQ:AKAM), a $12.47 billion market cap company with a robust 59.39% gross margin, to $95.00 from the previous $102.00, while maintaining a Neutral stock rating. According to InvestingPro data, the stock currently trades at 23.88x earnings, suggesting a premium valuation relative to its near-term growth prospects. Boolani provided insights into the company’s fourth-quarter performance, which included a slight beat in Delivery despite competition from Edgio, and in-line results for Security and Compute. The company generated $1.28 billion in EBITDA over the last twelve months, with revenue growing at 4.7%. InvestingPro analysis reveals multiple additional insights, including the company’s strong financial health metrics and future growth potential, available in the comprehensive Pro Research Report.
The company’s first-quarter and full-year 2025 guidance did not meet consensus expectations, which Boolani believes will prevent the stock from gaining in the near term. Additionally, the unexpected release of three-to-five-year financial targets did not impress, with projected compound annual growth rates (CAGRs) of approximately 10% for Security and Compute, and Delivery expected to stabilize, contributing to around 10% top-line growth with operating margins under 30%. InvestingPro subscribers can access detailed financial forecasts and valuation metrics to better understand the company’s growth trajectory.
Increased capital expenditure, anticipated to reach the high teens, was another point of concern highlighted by Boolani. Despite Akamai’s efforts to improve disclosure and introduce new metrics for transparency, which are expected to attract investor interest, the analyst pointed out several challenges the company faces. These include regulatory issues surrounding TikTok, a saturated Security portfolio, and the need to navigate macroeconomic headwinds.
The company is also undergoing strategic shifts, with a potential repositioning of its Compute business and a two-year overhaul of its go-to-market strategy. Boolani noted that Akamai’s history of missing prior targets could continue to limit valuation expansion and stock performance, leading to the reiterated Neutral rating and reduced price target.
In other recent news, Akamai Technologies has been the subject of multiple analyst evaluations following its fourth-quarter earnings report. The company reported a robust earnings per share of $1.66, surpassing expectations, with revenue reaching $1,019.9 million, driven by a 25% increase in Compute and a 14% rise in Security. Despite these positive figures, Akamai’s guidance for 2025 revenue fell below street expectations, with a projected increase of 2-3%, affected by foreign exchange headwinds and loss of TikTok revenue.
Several analysts have adjusted their outlooks on Akamai. Craig-Hallum downgraded the stock to Hold, citing challenges such as a significant loss of business from TikTok and a slowdown in the security segment. BofA Securities also downgraded Akamai to Neutral, reflecting limited near-term growth catalysts as the company transitions to emerging sectors like API security. Meanwhile, Scotiabank (TSX:BNS) and Raymond (NSE:RYMD) James maintained their Outperform ratings, highlighting Akamai’s strategic focus on Security and Compute as key growth areas.
Raymond James noted Akamai’s effective management in navigating macroeconomic challenges, while Evercore ISI emphasized the company’s strong fourth-quarter performance and its shift towards high-growth areas. Despite varied analyst opinions, there is a consensus on the importance of Akamai’s strategic moves in Security and Compute, which now make up a significant portion of its revenue. As Akamai continues to adapt its strategy and focus on growth areas, investors will be watching closely for developments in these segments.
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