AKAM - Akamai rises as Piper Sandler upgrades citing recent pull-back

2023-04-11 07:33:04 ET

Akamai Technologies ( NASDAQ: AKAM ) shares rose more than 2% in premarket trading on Tuesday after investment firm Piper Sandler upgraded the content delivery network company, citing the recent pull-back in shares.

Analyst James Fish raised his rating on Akamai Technologies ( AKAM ) shares to overweight from neutral, noting that investors will likely force management to pull-back on spending and re-focus on margins, while the firm's remaining performance obligation estimates show an acceleration in 2022 that "went unnoticed" and could provide revenue upside.

Additionally, the company''s 20% price increase for Linode went "relatively unnoticed," while content delivery trends weren't "that bad" for the first-quarter of 2023, Fish added.

"We are reducing our Security estimates by ~2% on average, as the Network Security product set and go-to-market strategy remain questionable, though this can be corrected if the right decisions are made and should be valued as a 'GARP- like' business still rather than 'Value,'" Fish wrote in an investor note.

"If treated as such, given the strong margins and increasing mix to Security, Akamai should be getting a higher valuation (especially in a "margin re-focus" scenario), presenting a favorable risk-reward from current levels."

Fish also noted a potential investor pushback on Linode investments should result in a steadier pace of investments and eventually lead to an operating margin of 30% or more and roughly $1B in free cash flow by 2024.

Last month, Bank of America listed Akamai Technologies ( AKAM ) as one of the top stocks to thrive when interest rates are rising .

Analysts are largely bullish on Akamai ( AKAM ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates AKAM a HOLD .

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