Shares of Akamai Technologies Inc (AKAM - Free Report) scaled higher after billionaire activist investor Paul Singer’s Elliott Management Corp. hedge fund revealed a 6.5% stake in the company in a regulatory filing yesterday.
The hedge fund stated that it is looking to speak with Akamai’s board about this transaction and opportunities to improve the company’s profit margins and boost shareholder value.
Elliott Management's stake purchase in Akamai was greeted positively by investors. Akamai’s shares shot up more than 13% in the trading session yesterday. The stock closed the day at $65.67 per share.
According to the analysts at Oppenheimer, "Elliott has a strong track record of working with management teams to improve performance over the long term." Akamai's price target was increased to $75 from $55 by Brad Zelnick, an analyst at Credit Suisse.
Notably, Akamai’s shares have lost 1.5% of its value year to date versus the 26.9% increase of its industry.
Declining revenue contribution from large customers in the Internet Platform group namely, Amazon.com (AMZN - Free Report) , Apple, Facebook, Google, Microsoft and Netflix due to their do-it-yourself (“DIY”) initiatives remains a concern for the company.
Further, intensifying competition continues to weaken Akamai’s market share. Loss of large customers in the content delivery network (“CDN”) space is expected to have a negative impact on the company’s top-line in the near term.
However, we believe that rising demand for cloud infrastructure solutions, security, mobile products and online video as well as adoption of cloud services on a large scale by data centers pose significant growth opportunity for Akamai.
Zacks Rank & Key Picks
Currently, Akamai carries a Zacks Rank #3 (Hold).
Few better-ranked stocks in the technology sector worth considering are NVIDIA Corporation (NVDA - Free Report) and Intel Corporation (INTC - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for NVIDIA and Intel are currently pegged at 10.3% and 8.4%, respectively.
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