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On Friday, Raymond (NSE:RYMD) James made adjustments to its outlook on Akamai Technologies (NASDAQ:AKAM) shares, reducing the price target to $110 from the previous $115. Despite this change, the firm maintained its Outperform rating on the company’s stock, which currently has a market capitalization of $14.78 billion. According to InvestingPro analysis, Akamai is currently trading near its Fair Value, with management actively buying back shares to support stockholder returns.
The reduction in price target comes after Akamai reported its fourth-quarter results, which exceeded expectations, with the company maintaining a healthy 59.4% gross profit margin. However, Raymond James noted concerns that could potentially affect Akamai’s performance. These concerns include uncertainties surrounding ByteDance, a significant customer, and potential disruptions due to another sales refocus within the company. InvestingPro data shows the company’s revenue growing at 4.7% year-over-year, with additional insights available in the comprehensive Pro Research Report.
Akamai Technologies has seen a shift in its revenue composition, with over two-thirds now being derived from its compute and security segments. According to Raymond James, Akamai’s management has been effectively navigating these areas, which has helped to counterbalance broader macroeconomic challenges affecting the delivery segment of the business. The company’s financial health score is rated as GOOD by InvestingPro, with notably low price volatility compared to peers.
The firm’s analysis suggests that, while there are elements that warrant caution, Akamai’s core business areas are strong. The emphasis on compute and security is seen as a strategic move that aligns with current market demands and Akamai’s strengths.
Investors and market watchers may find the maintained Outperform rating indicative of Raymond James’ confidence in Akamai’s strategic direction and execution capabilities, despite the slightly lowered price target. The company continues to adapt to the evolving digital landscape, focusing on areas of growth that could drive its performance in the future.
In other recent news, Akamai Technologies reported fourth-quarter earnings that exceeded analysts’ expectations, with adjusted earnings per share (EPS) of $1.66 compared to the consensus estimate of $1.52. The company’s revenue for the quarter reached $1.02 billion, slightly above the anticipated $1.01 billion. However, Akamai’s guidance for the first quarter and full year 2025 fell short of expectations, projecting Q1 EPS of $1.54-$1.59, below the $1.61 consensus, and Q1 revenue guidance of $1-1.02 billion, less than the expected $1.04 billion. For 2025, Akamai anticipates EPS of $6.00-$6.40 and revenue of $4-4.2 billion, which is below analysts’ projections of $6.82 EPS and $4.25 billion in revenue.
The company’s Security and Compute segments showed growth, with Security revenue increasing by 14% and Compute revenue by 24% year-over-year, while Delivery revenue declined by 18%. Evercore ISI maintained an Outperform rating on Akamai, though it lowered the price target to $105, citing strong operating margins and a favorable revenue mix. On the other hand, Piper Sandler downgraded Akamai from Overweight to Neutral, reducing the price target to $100, expressing concerns over the company’s lower-than-expected initial 2025 guidance and the optimism of its long-term business framework. Despite these challenges, Piper Sandler noted positive developments in Akamai’s Enterprise Infrastructure and go-to-market strategy. Analysts remain cautious due to the company’s low growth in the Security segment and declining margins.
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