By Todd McDonald, Analyst
Akamai Technologies (NASDAQ:AKAM) is slated to report 1Q 2013 earnings after the close of trading on Wednesday, April 24. Results are typically available just after 4:01 p.m. EST. A conference call will follow at 4:30 p.m. EST. Akamai is a leading provider of enterprise cloud infrastructure services for storing and delivering content through the internet.
Outliers & Strategy
- Adjusted Earnings Per Share: Consensus estimates are for adjusted earnings per share of $0.46, the low end of the range of $0.45 to $0.50. (Source: Yahoo Finance) Akamai has beaten estimates 7 of the last 8 quarters.
- Revenues: The Street estimate is for revenues of $357.58 mln, with a range of $352.30 mln to $362 mln.
- Sympathy Plays: Juniper Networks (NYSE:JNPR), Level Three Technologies (NYSE:LVLT), Riverbed Technology (NASDAQ:RVBD)
- Implied Volatility: Over the past eight quarters, Akamai has had an average move of approximately 15% after earnings are released. Options premiums are pricing in about a 12% move after earnings, which implies an estimated price range of $30.91-$39.34. Akamai has a significant short interest of over 10%.
- 04/23: Akamai released a 4Q2012, "State of the Internet," in which the company highlights usage metrics. The report indicates that 700 million unique IP addresses connected to the Akamai Intelligent Platform, a 13% increase from 4Q2011.
- 03/26: Akamai and KT, a leading telecommunications company in Korea, announced plans to expand their existing strategic partnership. The partnership will allow KT to use Akamai's technology to provide content delivery network (CDN) services.
- 03/25: Oppenheimer lowered its price target to $43 from $45, according to a post on StreetInsider.com. The firm believes that 2013 will be a transition year for Akamai, due to gross margin pressures stemming from increased costs to improve security and latency performance for the company's wireless device offerings. Oppenheimer reiterated its Outperform rating.
- 03/12: According to a post on StreetInsider.com, Goldman Sachs reiterated a Neutral rating with a price target of $40 following Akamai's annual investor summit. Analyst Heather Bellini noted the expectation of a long period of reinvestment in the company that hurts near-term profitability.
Akamai has been a substantial underperformer in 2013, declining about 16% YTD. If earnings results disappoint, look for major support near $33, an important, longer-term level that was just successfully held. If results surprise to the upside, look for initial resistance at the 200-day SMA near $37, followed by the beginning of February's gap near $41. (Chart courtesy of StockCharts.com)
Akamai has had a tough year thus far, thanks in part to a disappointing earnings release last quarter and a need for the company to significantly increase capital expenditures to remain competitive in the cloud computing industry. At current levels, it seems as though much of the bear-case is priced in. Therefore, even a marginally positive report should be enough to propel Akamai shares higher.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.