Akamai: Security and Streaming

06/05/2020 5:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Akamai Technologies (AKAM) seems built for the coronavirus quarantine and may be one of few companies to exit the recession in a stronger position than where it entered, asserts Richard Moroney, growth stock specialist and editor of Dow Theory Forecasts.

With more than 250,000 servers in 130 countries, Akamai operates a massive computing platform focusing on two businesses: cybersecurity and online content-delivery networks.

The pandemic appears to be accelerating long-term trends that should benefit Akamai. Management expects an enduring boost in internet usage, partly due to more people permanently working from home. Similarly, telecommuting heightens the importance of Akamai’s security products.

The biggest question mark for Akamai revolves around its exposure to the travel and hospitality;  Akamai’s customers include some of the biggest global airlines, hotels, and cruise lines — all suffering sharply lower demand that may not reverse until next year.

In late April, management withdrew its 2020 guidance, citing concern over the outlook for the retail and travel industries. But its June-quarter forecast calls for strong growth.

Akamai trades at 20 times estimated 2020 earnings, a 12% premium to the industry average. That premium seems justified considering Akamai’s growth profi le and increasingly bullish analyst estimates.

The stock scores in the top decile of our Quadrix research universe for Momentum, Financial Strength, and Earnings Estimates. Earning an Overall score of 91 out of 100, Akamai is a long-term buy.

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