Company Name: Akamai Technologies
Entry Price: $114
Target Price: $126
Projected Yield: 10.50%
Time Line: 3 to 6 months
About Akamai Technologies
Akamai Technologies provides cloud services for accessing, storing, optimizing, and protecting content and business applications. The company is considered one of the industry leaders and uses 240,000 geographically distributed servers to deliver the content to the users. The Akamai network helps drive traffic to the most visited sites on the web; besides, the servers are used to protect the network from cyber attacks.
What's the Idea?
Capitalize on a stock that can rise with the increasing web traffic worldwide and the expansion of cybersecurity industry.
Buy Akamai Technologies Shares >>
Why Trade Akamai Technologies?
Reason 1: The Increasing Traffic and Cybersecurity Industry Expansion
The pandemic provided Akamai Technologies with a good customer flow and the rising earnings in Q2 2020, while the Q3 outlook is also positive. With the web traffic having increased thanks to the growing popularity of online content during the pandemic, the company was able to successfully sign contracts. The possibility of a new lockdown increases the demand for the company's core services, which will help to further increase the earnings. According to Mordor Intelligence, the entire industry will maintain its double-digit growth to reach $40B in the midterm.
In addition, Akamai is diversifying its business and actively strengthening its presence in the rapidly growing cybersecurity sector. With the deployment of 5G networks around the world, cybersecurity may become an additional growth factor. The data storage and protection market is expanding, with largest corporations entering it, which is a threat to Akamai. As for cybersecurity, however, the unique applications will prevent big players like Amazon from competing in niche-specific secure enterprise solutions. In addition, the industry is large and not yet that "high populated", which means even a few players can work in it with high margins. The industry growth rate is estimated at 10%, and its size may reach $330B by 2027, according to some analytic reports.
Another factor in the company's earnings stability is the renewed partnership with AT&T until 2023. This will allow Akamai Technologies to receive stable orders, as well as to more transparently plan its future investments and financial transactions.
Reason 2: An Attractive Asset with Stable Financial Conditions
Over the last few years, Akamai Technologies' margin has increased. This ascending trend is expected to continue over the next five to seven years. Akamai Technologies' business is not too much subject to market fluctuations. The company has a stable financial condition, the debt burden is low (net debt to EBITDA is 0.45x), while it also has $1.37B of liquid funds on its balance sheet. In the first six months of 2020, the free cash flow reached $186M, while the operating cash flow amounted to $520M.
The current situation provides an excellent opportunity for the company to continue developing. Comparative analysis of revenue and profit growth among the industry competitors shows the high investment attractiveness of Akamai Technologies. It may well be that the current estimates and the growth outlook may open up opportunities for a larger non-core player to take over Akamai.
Reason 3: Possible Sharp Increase in Stock Price
In 2020, there was a rather active selloff of the company's shares by insiders, which led to opening of many short positions. Currently, the insiders have not been selling the stock for two months, while a fairly large number of players in the market remained short. As a result, the ratio of "short" shares to free float amounted to 7%. This means that the sellers might stop going short, as the stock might be rising, and start buying instead, which would increase the price even further.
How to Use the Idea
- Buy Akamai Technologies stock at $114.
- Allocate no more than 2% of your portfolio amount. To build a balanced portfolio, you can use our analysts' recommendations for an USD or a EUR portfolio.
- Sell the stock when the price is at $126 per share.
How to Buy Akamai Technologies Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type AKAM.US (Akamai Technologies ticker in the NASDAQ) in the search box, and select Akamai Technologies Inc. in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search box that shows up. type AKAM.US (Akamai Technologies ticker in the NASDAQ) and select Akamai Technologies Inc. in the results. You will then see Akamai Technologies stock in the market watch; tap it and go to the Order tab in the dialog that will show up. Specify the number of shares you want to buy and click Buy.
Buy Akamai Technologies shares: do not miss the company's growth amid the increasing web traffic!
Buy Akamai Technologies Shares >>
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