Akamai Technologies (AKAM, Financial), a leading provider of cloud based internet content and delivery infrastructure remains on track to overcome four major challenges such as supplying video over the web with supreme quality, scale and at a low-price; driving performance of websites and applications on any device, anywhere,
It also provides critical solutions for cyber-attacks to secure websites and data centers and enhancing branch office connectivity for its major enterprises through accelerated speed and moderate rate that could probably boost its growth.
What next
The internet content delivery company expects adjusted earnings in the range of $0.40 to $0.42 per shares along with its revenue that is forecasted to range between $332 million and $342 million for the third-quarter 2014, exceeding analysts’ expectations on both top and bottom lines. Analysts had been modeling earnings of $0.38 per share on the revenue of $330.8 million for the third-quarter 2014. Let us look at the factors that could probably drive its growth in the second-half of the year.
Akamai Technologies is expected to deliver better performance in the third-quarter as the company is observing strong growth momentum for its enhanced media delivery solutions. It sees increased traffic particularly in the gaming, video and social media platforms due to high-profile event such recent FIFA world-cup 2014 that delivered approximately 220 petabytes of world-cup traffic for around 55 broadcasters in about 80 countries.
It had also delivered 2.5x amount of traffic for Sochi Olympic Games. Moreover, the company received significant positive responses from most of these customers who evaluated its performance as “nothing short of perfect”. Media delivery solutions had accounted yearly growth of 20% and sequential growth of 1% in the second-quarter 2014.
Besides, its security business look more promising as the company has now strategically integrated recently acquired Prolexic solutions to its innovative world-class security solutions that are receiving tremendous traction in the market.
In addition, the company is involved in directing its efforts aggressively on technological integration, expansion of the Security Operations Center and investing a big amount in constructing extra network capacity in the second half of the year. Both these companies are now concentrating on laying the most wide-ranging assortments of securities for big as well as small and mid-sized enterprises that should advance its growth going forward.
Looking forward
Moreover, Akamai Technologies is experiencing an increased movement in the scale as well as in the sophistication of cyber-attacks worldwide. Due to its highly recognized unique capabilities of security solutions the company is witnessing increasing number of enterprise customers adopting its wide-ranging security solutions that comprehensively defend websites and applications. There are approximately 1500 customers who are actively using its security solutions and nearly 800 customers had purchased both of its new cloud-based flagship products such as Kona Site Defender and Prolexic Solutions.
Further, the company expects a healthy growth for its cloud-based flagship products in the second-half with increased cyber-attacks worldwide. To quote some examples of these attacks; the DDoS attacks expanded 22%, infrastructure outbreaks grew approximately 46% and average attack bandwidth accelerated about 72% during the second-quarter.
However, the company is seeing increased competition from its rivals such as Verizon (NYSE: VZ) has recently unveiled new cloud-based Web Application Firewall (WAF) that is expected to deliver high-class security against Cyber-attacks. Verizon has set more rules set for its WAF products with securely integrated content delivery network, offering other cloud alternatives to the customers. Also, WAF command-and-control plane give customers more controls and tools to block and fend off attackers that will certainly hinder AKAM’s growth in the future.
Meanwhile, Akamai Technologies is also seeing a reasonable performance for its service and support solutions that should complement its overall growth in the second-half as the company is now integrating its enterprise-class professional service and customer support to its core business solutions that now offer better prospects for the company.
Conclusion
Akamai Technologies had developed comprehensively a compelling business model that focuses on providing superior content and rich web-experience with innovative cloud-based security solutions that should drive its growth in the future. Moreover, its valuation looks pretty healthy as it currently trades at the trailing P/E multiple of 37.27 and forward P/E multiple of 21.79. Its PEG ratio of 1.66 for the next five years further complements its growth in the future. In addition, the company is performing remarkably well on performance and wealth matrixes.
Its profit and operating profit yields for the trailing twelve months are 17.36% and 25.96% respectively, while its return on equity remains at 11.72% for last twelve months. Akamai Technologies has operating cash flow of $618.87 million and free cash flow of $276.62 million, quite enough to cover its total debt outstanding of $595.39 million, which is well mixed by most measures. All-in-all, the company looks good for investment and analysts have estimated CAGR of 15.57% for the next five years that indicate potential growth for the company in the coming months.
