Akamai: As It Turns Out, Not Immune to a Downturn

Akamai (AKAM) shares came under selling pressure today following some cautionary comments on the outlook for the company from Jefferies & Co.’s Katherine Egbert. “We have picked up datapoints that indicate Akamai’s business is not completely immune to the current macro headwinds,” she writes.

She provided four areas where the company is showing signs of trouble:

• Q1 bookings did not meet targets, she says.
• She says the company may need to pay rebates to large media customers who had lighter than expected traffic in the quarter, perhaps for reasons connected to the Hollywood writers’ strike.
• Akamai’s Web application acceleration management system “was down for a significant amount of time in Q1, she says.
• Enterprise customers, she says “have become slower to purchase product add-ons and expanded services.” She says “deals appear to have slipped as customers are becoming more frugal with their budgets.”

Her conclusion: “This time around, Akamai appears to lack immunity from the macro headwinds.” She maintains her Hold rating and $32 price target on the stock.

Akamai was down .79, or 2.6%, to $29.60, at market close, and was continuing to fall in after-hours trading..

Comments

[CrossProfit:]

We agree with Katherine Egbert on the bookings/target issue alone. However, we think that most analysts, including Katherine Egbert, are underestimating the shortfall. For a 50+ P/E multiple, the PPS is still priced to perfection and then some.

We first noticed subtle signs of a developing trend in October 2007 and were somewhat surprised that this was not mentioned by any of our colleagues in January. Perhaps we should be grateful that others picked up on it in April. From the PPS, the general market hasn't a clue.

See;
www.crossprofit.com/vi...

The other three points mentioned in the article are of less concern to us, assuming that they are correct. We have not verified.

We disagree with the hold rating.

consensus CrossProfit

2008 Apr 14 05:00 PM

[Dan Rayburn:]

Akamai Confirms No Outage Of Their Web Acceleration Network
blog.streamingmedia.co...

2008 Apr 14 05:42 PM

[CrossProfit:]

Dan Rayburn,

We were just being polite towards our colleague. In case you hadn't noticed, we repeated ourselves in our comment...

Thanks for the link.

CrossProfit

2008 Apr 14 06:41 PM

[tessant:]

even the companies that i thought were safe are dropping earnings like flies....oy...

-scott
marketbar

2008 Apr 14 11:42 PM