Akamai Technologies Inc. (NASDAQ:AKAM) is set to report FQ4 2013 earnings before the market opens on Wednesday, February 5th. Akamai Technologies is an internet content delivery network (CDN) which deliveries between 15% and 20% of all traffic on the web. AKAM stock is trading down this week after it was reported that Apple (NASDAQ:AAPL) has been working on its own CDN, which is a measure that Netflix (NASDAQ:NFLX) took last year. This quarter Wall Street is expecting Akamai's fourth quarter revenue to be down 6% compared to last year while revenue is expected to be up 12%. Despite the trimmed outlook from Wall Street, investors are expecting a great quarter from AKAM.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Akamai Technologies to report 51 cents EPS and $422.26M revenue while the current Estimize.com consensus from Buy Side and Independent contributing analysts is 55 cents EPS and $426.68M revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Akamai Technologies to beat the Street's expectations on profit and revenue by a considerable margin.
Over the previous six quarters the consesus from Estimize.com has been more accurate than Wall Street in forecasting Akamai Technologies' profit and revenue 4 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a larger differential compared to recent quarters.
The distribution of estimates published by analysts on the Estimize.com platform range from 52 cents to 57 cents EPS and $423.32M to $430.00M in revenues. This quarter we're seeing a smaller distribution of estimates compared to previous quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrower distribution of estimates signals more agreement in the market, which could mean less volatility post earnings. If Akamai fails to live up to the lofty market expectations we could see the stock price pull back.
Throughout the quarter the EPS consensus from both Wall Street and Estimize have remained perfectly flat. Wall Street lowered its revenue expectation from $424.85M to $422.26M while the Estimize.com revenue consensus increased from $425.77M to $426.68 going into the report. Timeliness is correlated with accuracy and rising expectations going into the report are often a bullish indicator.
The analyst with the highest estimate confidence rating this quarter is RENS who projects 57 cents EPS and $430.00M in revenue. In the Winter 2014 season RENS is rated as the 495th best analyst and is ranked 21st overall among over 3,750 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case RENS is making a bullish call expecting Akamai Technologies to beat Wall Street's expectations on profit and revenue.
Although Akamai Technologies is under pressure from increased competition, buy-side and independent analysts as well as investors are expecting a great quarter. Given the increasingly challenging environment, if Akamai fails to live up to the high expectations from the Estimize.com community we could see the stock tumble.