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Investing.com -- Goldman Sachs started coverage of Akamai Technologies with a Sell rating and a $67 12-month price target in a note on Wednesday, implying 5% downside from Tuesday’s close.
The bank expects the stock to remain “likely rangebound pending clearer signs of growth stabilization/inflection.”
Goldman acknowledged Akamai’s “differentiated infrastructure back end, with globally-distributed points of presence across more than 4,000 locations,” originally built for high-performance content delivery and now leveraged into new growth areas in security and compute.
However, analysts expressed doubts over the company’s ability to grow consistently across segments.
In security, which accounts for about 52% of revenue, Akamai “lags as a network security platform,” and Goldman said it was “unclear… whether newer initiatives in microsegmentation and API security will be material enough to drive an inflection in growth.”
In compute, roughly 16% of revenue, Goldman said Akamai is in a capital-expenditure cycle to upgrade infrastructure for next-generation applications.
The bank noted that “upleveling Linode for the enterprise may take longer than expected” due to necessary product and go-to-market investments.
Delivery, at 33% of revenue, may see pricing and volume trends stabilize in the next few quarters, but Goldman still views it as “a drag to the growth algorithm” while security and compute remain the key long-term drivers.
Goldman said the stock’s discounted valuation “already partly reflects our view” and that “a re-rating in multiple will require more tangible progress” in stabilizing security revenue, improving compute returns, or showing evidence of long-term delivery stabilization.