On Friday, Scotiabank updated its financial outlook on shares of Akamai Technologies (NASDAQ:AKAM), increasing the price target to $115 from $110 while maintaining a Sector Outperform rating. This adjustment comes after Akamai Technologies reported second-quarter earnings that surpassed key financial metrics and raised its guidance for the year 2024.
The company's recent performance was particularly strong in the Security and Edge Compute segments, which are projected to account for nearly 75% of Akamai's revenue by the end of 2025. These areas are expected to drive the company's growth and enable it to exceed Wall Street's financial targets.
Despite challenges in the content delivery network sector, Akamai's management has confirmed its guidance, aligning with Scotiabank's perspective that current estimates already reflect potential difficulties in this area.
Scotiabank's report highlighted that while Akamai's recent results are promising, the company needs to demonstrate consistent positive results over multiple quarters in 2024 to solidify the trend of improvement. Such sustained performance is crucial for the company to close the significant valuation gap with its industry peers, which Scotiabank believes is not justified.
Akamai's updated targets suggest that the company anticipates maintaining its momentum going into the second half of the year. Scotiabank reiterated its Sector Outperform rating, emphasizing the importance of continued execution for Akamai to fully realize its growth potential and align its valuation more closely with that of its competitors.
In other recent news, Akamai Technologies has seen significant developments. Guggenheim recently upgraded Akamai's stock from Neutral to Buy, reflecting confidence in the company's transition from a content delivery network to a more diversified platform.
The firm also set a new price target for Akamai at $128.00. This comes as Akamai completed its acquisition of Noname Security, a prominent API security company, for approximately $450 million, enhancing its capabilities in the API security domain.
Analysts have also weighed in, with Scotiabank initiating coverage on Akamai with a Sector Outperform rating, citing strong prospects in security and edge computing. They predict these segments could account for approximately 75% of Akamai's business by 2025.
Piper Sandler maintained an Overweight rating, highlighting growth in Akamai's new security packages and potential for future upselling in the enterprise compute segment. KeyBanc, however, reduced its price target for Akamai due to lower-than-anticipated Delivery segment revenues and foreign exchange headwinds, but maintained its Overweight rating. These are all recent developments in Akamai's business trajectory.
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