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Needham Thinks Akamai’s Stock Performance Is As Good As It Gets
Stock Analysis & Ideas

Needham Thinks Akamai’s Stock Performance Is As Good As It Gets

Content delivery network (CDN) provider Akamai (AKAM) consistently delivers mid-single-digit revenue growth and strong cash flows, making it a good value investment stock. It released its second-quarter 2021 earnings on August 3, in which strong momentum in the security business and increased traffic on its intelligent Edge platform aided the year-over-year improvement in the top line. This uptrend is likely to continue for the rest of the year, as understood from the slight increase in the guidance for this segment.

However, analysts at Needham, led by Alex Henderson, believe that the share prices may have peaked without any sign of upside potential. Let us delve deeper and understand why. (See Akamai stock chart on TipRanks)

The security spending is at a record high currently. Nonetheless, Henderson expects the growth in Akamai’s security business to decelerate in the year 2022, on a difficult year-over-year comparison. This does not provide an incentive for investors to invest in the company.

Again, the Edge Technology segment, despite stronger growth possibility in 2022 due to a weak 2021, is unlikely to have any impact on the share price performance.

The company expects to ramp up its hiring in the last leg of this year, which would increase the operating expenses. Moreover, merit-based increases in wages expected in the third quarter, along with planned growth in T&E expenses, are expected to dent the operating margin.

Based on these takeaways, Henderson and his associates on August 4 downgraded the stock rating to a Hold but did not assign any price target.

Meanwhile, consensus among Tipranks’ analysts for Akamai is a Strong Buy based on 6 Buys and 1 Hold. The average Akamai price target of $144.17 implies 27.1% upside potential from current levels.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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