2024-07-12 04:44:43 ET
Summary
- Akamai's stock has gained more than 20% since February 2023, helped by growth in the Security and Compute segments, but a decline in Delivery is currently impacting earnings estimates.
- Diversification away from CDN is progressing rapidly, also helped both by its competitive positioning and acquisitions.
- The company is also profitable and generates an exceptionally high level of cash flow from operations.
- There are risks related mainly to one of its customers, which is the big social media company TikTok reducing costs.
- Due to its sustained diversification momentum, the stock deserves better.
Since I last covered Akamai ( AKAM ) in February 2023, it is up by more than 20% and currently trading around $94 as shown in the chart below. At that time, my bullish thesis was mainly based on growth prospects for its emerging Compute segment, which was competing with big public cloud service providers (or hyperscalers) like Amazon (NASDAQ: AMZN ) or Microsoft (NASDAQ: MSFT ). I was also optimistic because of diversification away from Delivery (content delivery network or CDN)....
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For further details see:
Akamai: Diversification Strength To Offset Short-Term Weakness