UPDATE: Goldman Sachs Downgrades Akamai Technologies (AKAM) to Sell

(Updated - November 20, 2015 10:34 AM EST)

Goldman Sachs downgraded Akamai Technologies (NASDAQ: AKAM) from Neutral to Sell with a price target of $52.00 (from $62.00), suggesting downside of 16%. Analyst Heather Bellini thinks Street estimates are too high given expectations for persistent headwinds.

"We view Street forecasts for 2016 as too high, as media delivery revenues take longer to materially snap back due to (1) large customers slowly bringing CDN in-house, (2) re emergence of more aggressive competition and (3) a focus on reducing software download sizes. As such, we see these headwinds persisting for longer than consensus is expecting," said Bellini.

The analyst added, "We forecast CY16 media delivery growth of 2% versus consensus of +6% yoy. We would expect consensus estimates to move closer to ours for this segment when AKAM guides off the 4Q15 call. Despite the guide down for 4Q15, Akamai trades at 10x EV/EBITDA and 23x P/E based on consensus NTM estimates. While this is in line with its average over the past five years on both metrics, we expect its top-line growth and non-GAAP operating margins as we look to 2016 to be meaningfully below its average over the same time period. We note that during AKAM’s last extended traffic slowdown, NTM EV/EBITDA and P/E multiples contracted 70% and 60% from before the 4Q10 print through September 2011, when growth in this segment started to accelerate meaningfully. Even after growth recovered, EV/EBITDA and P/E did not increase above 10x and 23x until May 2013."

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 $59.21 yesterday.

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