Shares of Akamai Technologies (NASDAQ:AKAM) were upgraded from Neutral to Outperform by Baird analysts. The broker said it is “taking advantage of recent weakness.”
“With valuation well below its five- and 10-year average, and a growing cloud security concentration (estimated at 50% of total revenue in 2024 vs. 39% three years ago), we view the risk/reward as attractive,” analysts said in a note.
“While delivery remains a headwind, we believe that's well understood, and we view compute, with low investor expectations, as possible upside in 2025+. We are buyers at current levels,” they added.
Among other things, Baird sees a strong growth trajectory in AKAM’s Security business, which is expected to make up 50% of 2024 revenue, up from 39% in 2021, potentially leading to a higher valuation multiple.
The firm also sees untapped potential in the Compute segment, with opportunities for cross-selling boosting prospects for 2025 and beyond. Meanwhile, the Delivery segment remains a solid cash flow contributor for AKAM, despite lowered expectations.
The target price on the stock was also raised to $135 from $128.
AKAM rose 1.1% in premarket trading Thursday.