Track Record of Akamai (AKAM) CEO Buys Increases Confidence in '16 - Piper Jaffray

Two factors that give Piper Jaffray confidence that Akamai Technologies (NASDAQ: AKAM) will relatively outperform: 1) estimates appear too conservative relative to major events that will impact media delivery revenue in Q3/Q4 (summer Olympics and presidential election), and 2) the CEO has had an impressive track record of insider buys and is in the process of purchasing $10M of AKAM shares.

Over the last 4 years, Akamai's highest media delivery growth quarters (both 22% y/y) came during non-annual major events: the 2012 Summer Olympics (Q3'12) and the 2014 World Cup (Q3'14). Looking to 2H'16, both the 2016 Rio Summer Olympics (Q3'16) and the US presidential election (Q4'16) should be catalysts for media delivery volumes. While those catalysts are present in 2H'16, expectations are for media delivery revenue growth of only 5% y/y. Media delivery growth will be impacted by the reduction in usage from the company's two largest customers (Apple and Facebook), but based on analysis of past events, estimates for ~5% y/y 2H'16 media delivery growth could prove low.

Akamai CEO (Tom Leighton) has historically had good timing when buying AKAM shares. The CEO is in the process of buying $10M of AKAM shares (~$5M was already purchased in mid Feb). Over the past 8 years, he has purchased shares in the open market 9 times, with the stock up an average of 41% 6 months post those dates. There is only one instance where AKAM shares were down in the 6 months after the CEO purchased shares (-10% in 2011).

No change to Overweight rating or PT of $69 based on 22x CY17E EPS.

For an analyst ratings summary and ratings history on Akamai Technologies click here. For more ratings news on Akamai Technologies click here.

Shares of Akamai Technologies closed at $56.07 yesterday.

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