Akamai Technologies, Inc.’s 30% Gains in 2020 Are Just the Beginning
The COVID-19 pandemic has forced tens of millions of people around the world to self-isolate and work from home. That meant businesses had to ensure their remote workforce was more secure than ever before.
While cybersecurity and cloud stocks were already popular, the need for increased cybersecurity and a faster, more reliable Internet made their company’s products and services even more in demand. When it comes to securing a remote workforce, few, if any, companies are more trusted than Akamai Technologies, Inc. (NASDAQ:AKAM).
While many cybersecurity and cloud stocks have seen their share prices soar since the coronavirus fueled the sell-off in March, AKAM stock’s gains have been more measured.
The company’s share price is up 30% year-to-date, and it has advanced 49.5% since bottoming in the middle of March.
Solid gains indeed, but less than those of its peers. The First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) is up 66% since the middle of March. Over the same time frame, the ETFMG Prime Cyber Security ETF (NYSE:HACK) is up 56%.
Akamai Technologies stock’s gains this year have also been trailing other popular cybersecurity and content delivery network (CDN) stocks. Since bottoming in mid-March, Palo Alto Networks Inc (NYSE:PANW) shares have climbed 92%, Fortinet Inc (NASDAQ:FTNT) shares have gone up 107%, Cloudflare Inc (NYSE:NET) stock shares have soared 153%, and Fastly Inc (NYSE:FSLY) shares have increased by an eye-watering 793%.
Correlation is not causation though; not all cybersecurity or CDN stocks will experience massive growth. But Akamai Technologies, Inc., with its large scale and strong profitability, still has plenty of room to run in 2020 and 2021. And, if anything, over the coming months, it could experience stronger gains than the previously mentioned tech stocks.
AKAM Stock Overview
Akamai is home to the world’s largest cloud delivery platform, which makes it easier for its customers to provide the best, most secure digital experience on any device. The company’s deployed CDN includes 288,000 servers in 136 countries, and approximately 1,500 networks. (Source: “Facts & Figures,” Akamai Technologies Inc., last accessed July 8, 2020.)
What does that look like on a practical level?
A whopping 85% of the world’s Internet users are within a single “network hop” of an Akamai CDN server.
Akamai is also the most trusted cloud delivery platform, as selected by:
- 50% of the Fortune Global 500
- 40% of the Fortune 1,000
- 19 of the top 20 U.S. e-commerce retailers
- All five branches of the U.S. Department of Defense
- Seven of the top 10 global banks
- All of the top 25 U.S. banks
- Four of the top five largest global insurers
- Seven of the top 10 U.S. high-tech software providers
- 12 of the top 15 U.S. high-tech hardware providers
- 23 of the top 24 global video game companies
- Eight of the top 10 global semiconductor companies
- Eight of the top 10 infotech companies
- All of the top five global consumer goods companies
Akamai’s customers include Apple Inc. (NASDAQ:AAPL), Electronic Arts Inc. (NASDAQ:EA), Home Depot Inc (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), AmericanIdol.com, and E*TRADE Financial Corporation.
Chart courtesy of StockCharts.com
First-Quarter Revenue Up 8%, EPS Up 15%
On April 28, Akamai Technologies announced that its revenue for the first quarter of 2020, ended March 31, had increased eight percent year-over-year to $764.0 million. (Source: “Akamai Reports First Quarter 2020 Financial Results,” Akamai Technologies Inc., April 28, 2020.)
Revenue from the company’s “Web” and “Media and Carrier” divisions was up eight percent year-over-year, while revenue from its “Cloud Security Solutions” division was up 26%.
Dr. Tom Leighton, CEO of Akamai, commented, “We achieved excellent results in the first quarter driven by continued strength in our security solutions and stronger than expected traffic growth. Akamai’s Intelligent Edge Platform is uniquely positioned to help the Internet scale quickly and is a lifeline for organizations and people around the globe during this challenging time.”
The company reported that its first-quarter net income increased 15% year-over-year to $123.0 million, or $0.75 per share. Adjusted earnings per share climbed nine percent year-over-year to $1.20.
Cash from operations for the first quarter was $223.0 million, or 29% of revenue. Akamai ended the quarter with cash, cash equivalents, and marketable securities of $2.2 billion.
During the first quarter, Akamai spent $81.0 million repurchasing 900,000 shares of its common stock, at an average price of $92.45 per share.
Because of COVID-19, Akamai Technologies, Inc. has seen demand rise for its cybersecurity, cloud, and CDN products. During the first quarter, the company experienced continued growth in its security solutions and stronger-than-expected traffic growth.
Keep in mind, the U.S. economy was only shuttered due to the coronavirus in the closing weeks of March. It was closed for most of the second quarter. Thanks to its large scale and in-demand products, Akamai should experience solid growth, even after the U.S. and global economies open.