Akamai is expected to report its Q2 FY 2024 results on August 8, with estimated revenue of $980 million and earnings of $1.55 per share, slightly above consensus estimates. The company’s legacy content delivery business is shrinking, but its security segment is growing rapidly, with sales up 21% year-over-year to $491 million. Akamai’s focus on API security, through acquisitions like Neosec and Noname Security, is driving strong demand in this space, with IDC Research predicting the API security market to reach nearly $1 billion by 2027.
Akamai’s expansion into cloud computing, following the acquisition of Linode, is another key trend to watch. The company unveiled the Akamai Connected Cloud in 2023, putting it in competition with major players like Amazon AWS, Microsoft Azure, and Google. Compute revenues rose by 25% year-over-year to $145 million in the last quarter, showing a positive growth trajectory for Akamai in the cloud computing space.
Despite little movement in AKAM stock, with performance at $105 in early January 2021 to around $95 currently, the stock has underperformed the S&P 500 over the past few years. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 consistently. The portfolio has provided better returns with less risk compared to the benchmark index, showing a more stable performance.
With a reasonable valuation and a forward earnings multiple of approximately 15x, Akamai stock has potential for meaningful upside if it executes well in the computing and security markets. The company’s $121 price estimate is 25% higher than the current market price, highlighting the potential for growth. As the macroeconomic environment remains uncertain, with high oil prices and elevated interest rates, the performance of Akamai stock over the next 12 months will be closely watched to see if it can outperform the S&P.
Overall, Akamai’s focus on security offerings, acquisitions in the API security market, expansion into cloud computing, and reasonable valuation make it a bullish pick for investors. The company’s performance in the upcoming quarter, particularly in the computing and security segments, will be key in determining its future growth trajectory and potential for stock price appreciation.
