Akamai (AKAM) Hits New 52-Week Low On Increasing Headwinds

Share price of Akamai Technologies Inc. (NASDAQ:AKAM) dropped to a new 52-week low of $47.46, eventually closing a tad bit higher at $47.50. This represents a one-year decline of 6.3% against the S&P 500’s gain of 7.5%.

The underperformance can be attributed to growing headwinds related to do-it-yourself (DIY) initiatives by large Internet companies, intensifying competition and pricing pressure. We note that these headwinds have pulled down current year earnings estimates over the last 30 days.

We note that since its first-quarter results (announced on May 2), the stock has plunged a massive 24%. The sell-off can be attributed to the disappointing second-quarter outlook.

Currently, Akamai has a Zacks Rank #5 (Strong Sell). Notably, the stock has a market cap of $8.21 billion.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Key Factors

Akamai reported adjusted first-quarter 2017 earnings (including stock-based compensation expense and amortization of capitalized stock-based compensation) of 53 cents per share, which beat the Zacks Consensus Estimate by a penny.

Revenues of $609.2 million marginally beat the Zacks Consensus Estimate of $605 million and increased almost 7.3% from the year-ago quarter (up 8% adjusted for foreign exchange). However, revenues declined 1.1% from the previous quarter.

We note that declining revenues from Internet Platform Customers is a major headwind that is affecting top-line growth. DIY initiatives by large Internet companies like Amazon.com (NASDAQ:AMZN) , Apple (NASDAQ:AAPL) , Facebook (NASDAQ:FB) , Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX) remain a concern for the company’s media delivery business.

Revenues from Internet Platform Customers were $51.4 million, plunging 29.2% year over year in the first-quarter. Sequentially, revenues from Internet Platform Customers declined 12%.

Moreover, the outlook was disappointing. We believe that recently launched products like Bot Manager and Image Manager will take some time to fully penetrate the market. Hence, we don’t expect revenue growth to accelerate at least in the near term.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2017 declined 4.8% to $1.98 over the last 30 days, as 11 out of 13 analysts revised their estimates downward. Also, for fiscal 2018, estimates were down 1.4% to $2.05 over the same time frame.

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