Akamai: No Longer Growing At Warp Speed

Akamai's earnings were a disappointment, and not just because it fell more than 20%. I have been behind Akamai as my favorite tech name, but I might have to demote it to a bench player.

I sold a third of my position, but will keep the rest as it has gone from too expensive to too cheap rather quickly. Akamai’s having trouble gaining a significant number of new customers and will likely have to just squeeze more money out of old customers by offering them more services.

My analysis on the digital online revolution and Akamai’s core position in it still holds, which is why I’m holding on. However, we’ll have to accept the fact that Akamai has grown up (it was added to the S&P 500) and gone from a super fast grower to… just a fast grower.

I still believe Akamai can grow at over 25% a year, though that’s down from the 30%+ estimates of the past, which is why there was so much disappointment. At current valuations and assuming a 25% growth rate, I do not believe Akamai will go below $30.

We’ll have to see where we are after we shake out all the momentum players that only play the super fast growers. Fil Zucchi over at Minyanville.com has a good analysis of Akamai’s current situation.

See also: Akamai Technologies Q2 2007 Earnings Call Transcript

Disclosure: Author is long AKAM