Back to top
Read MoreHide Full Article

Share price of Akamai Technologies Inc. (AKAM - Free Report) dropped to a new 52-week low of $47.46, eventually closing a tad bit higher at $47.50. This represents a one-year decline of 6.3% against the S&P 500’s gain of 7.5%.

The underperformance can be attributed to growing headwinds related to do-it-yourself (DIY) initiatives by large Internet companies, intensifying competition and pricing pressure. We note that these headwinds have pulled down current year earnings estimates over the last 30 days.

We note that since its first-quarter results (announced on May 2), the stock has plunged a massive 24%. The sell-off can be attributed to the disappointing second-quarter outlook.

Currently, Akamai has a Zacks Rank #5 (Strong Sell). Notably, the stock has a market cap of $8.21 billion.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.



Key Factors

Akamai reported adjusted first-quarter 2017 earnings (including stock-based compensation expense and amortization of capitalized stock-based compensation) of 53 cents per share, which beat the Zacks Consensus Estimate by a penny.

Revenues of $609.2 million marginally beat the Zacks Consensus Estimate of $605 million and increased almost 7.3% from the year-ago quarter (up 8% adjusted for foreign exchange). However, revenues declined 1.1% from the previous quarter.

We note that declining revenues from Internet Platform Customers is a major headwind that is affecting top-line growth. DIY initiatives by large Internet companies like Amazon.com (AMZN - Free Report) , Apple (AAPL - Free Report) , Facebook (FB - Free Report) , Google, Microsoft and Netflix remain a concern for the company’s media delivery business.

Revenues from Internet Platform Customers were $51.4 million, plunging 29.2% year over year in the first-quarter. Sequentially, revenues from Internet Platform Customers declined 12%.

Moreover, the outlook was disappointing. We believe that recently launched products like Bot Manager and Image Manager will take some time to fully penetrate the market. Hence, we don’t expect revenue growth to accelerate at least in the near term.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2017 declined 4.8% to $1.98 over the last 30 days, as 11 out of 13 analysts revised their estimates downward. Also, for fiscal 2018, estimates were down 1.4% to $2.05 over the same time frame.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Amazon.com, Inc. (AMZN) - free report >>

Akamai Technologies, Inc. (AKAM) - free report >>

Facebook, Inc. (FB) - free report >>

Apple Inc. (AAPL) - free report >>


More from Zacks Analyst Blog

You May Like