Q4 Preview: No Surprises for Akamai... But What About All That Cash? (AKAM)

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AKAM Hot Sheet

Rating Summary:
16 Buy, 9 Hold, 0 Sell

Rating Trend:

Up

Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0

Shares of Akamai Technologies (Nasdaq: AKAM) are trading higher Tuesday heading into its fourth-quarter report, expected out after the market closes.

The Street is expecting flat year-over-year earnings of 40 cents on a 10 percent revenue increase to $311.3 million.

Over the last five quarters, Akamai has managed to beat analyst earnings expectations by an average of 1.7 percent (or 2.8 percent minus the miss in the second quarter of last year).

Data from Bloomberg shows nine analysts have a Buy rating on Akamai, 14 are at Hold, and two maintain a Sell-equivalent call. The Street's price target average is $33, with a low of $22.50 and high of $38.

Shares of Akamai have traded within a range of $18.25 to $49.38 over the last year, and it's current trading level is just about in-line with the Street's average.

Analyst Comments

Wells Fargo is modeling EPS of 39 cents and revs of $310 million, saying it doesn't expect any surprises in the quarter.

The firm highlighted some key focus areas: "Insights on CDN pricing likely limited impact on near term results but our checks indicate the pricing environment is better in 2012 than 2011.Akamai Rationale behind Cotendo acquisition we think AKAM is focused on the product set cloud and mobile content acceleration vs customer relationships. 2012 product launches Akamai / Riverbed Cloud Solutions Partnership (Q1'12)/ Ericsson mobile content acceleration (mid 2012)."
Dougherty & Co. sees EPS of 39 cents and revs of $310 million. The firm is modeling for a 20 percent decline per year in CDN pricing; flat revenue in CDN means Akamai would need to see a 25 percent increase in volume year over year. Gross margins are expected to be 79 percent, flat sequentially.

One investor concern Dougherty thinks might carry over is the large cash hoard, which the firm thinks will cause Akamai to continue with aggressive buybacks.
D.A. Davidson sees earnings of 26 cents per share and revs of $313 million. The firm also sees pressure from lower CDN pricing. DA Davidson said, "We expect CDN prices to media customers to continue to fall by 25 percent per year as CDNs pass through lower bandwidth costs. We think that Akamai is helping with Netflix’s (Nasdaq: NFLX) UK/Irish roll-out, as well as working with the Ultraviolet cloud streaming, so volume growth could offset the pricing declines later in 2012."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Akamai's past performance at Streetinsider's Akamai's Income Statement.

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