Akamai: Piper Sees A Bargain; Upgrades To Overweight
Mar. 25 2011 - 11:49 am
By ERIC SAVITZ
Akamai (AKAM) shares are trading higher this morning after Piper Jaffray analyst Michael Olson this morning upped his rating on the stock to Overweight from Neutral, setting a $45 price target.
Olson points out in a research note that the content delivery network company’s shares are down more than 20% since the company disclosed Q4 earnings, largely due to a disappointing Q1 outlook. He contends that the slide is overdone.
“There will be many competing online video services and ecommerce sites, but Akamai serves as a common denominator that benefits from market growth, regardless of which of those services or sites gain share,” he writes. “While there are constant pricing and competitive pressures in the space, this is balanced with a significant opportunity to benefit from the tailwinds of growth in online video and ecommerce.”
Olson contends the company’s guidance for the first quarter led investors to the conclusion that CND pricing is falling faster than in actually the case.
“We believe CDN pricing is declining at relatively normal rates, but Akamai renewed deals with 8 of the top 10 CDN customers in the last few months, which results in a step down in pricing, as is always the case with contract renewals,” he writes. “The reason these renewals were lumped together in the last few months is many usage based contracts reached the commitment levels required to trigger a renewal, which combined with typical periodic renewals of time based contracts, resulted in more renewals than normal in one quarter.”
AKAM this morning is up $1.27, or 3.4%, to $39.03.
Good judgment comes from experience, and a lot of that comes from bad judgment.
