Analysts at the Bank of America have initiated coverage on cloud services provider Akamai Technologies, Inc. (NASDAQ:AKAM) with a ‘Buy’ rating on their belief the company has a unique opportunity in the fast-growing Cloud niche of distributed computing.
The analysts also awarded the stock a price objective of US$145, representing an upside of about 38% from Akamai’s share price at the time of writing of US$103.80.
They believe that Akamai’s expansion from a content delivery networking company into complementary areas such as web security, edge computing and most recently distributed computing is being underappreciated by the Street.
Akamai’s expansion into distributed computing represents its next phase of growth, they wrote.
“By leveraging its strong foundational network, Akamai is able to offer a unique hybrid cloud solution that combines core compute and edge functionalities, enabling clients, particularly those in high-traffic industries like media, financial services and gaming, to perform key compute tasks efficiently while reducing costly egress fees,” they wrote.
“The entry into the distributed compute market also aligns with broader industry trends including the growing emphasis on user experience, digital transformation, the adoption of multi-cloud infrastructure, and the growing use cases and applications of AI.”
The BoA analysts also highlighted that Akamai’s long-term targets imply double-digit revenue and earnings per share growth as early as 2025.
They believe the Street does not fully appreciate the company’s computing opportunity, modelling 17% growth in the 2025 calendar year compared to Akamai management’s target of 20% growth.
“Combined with revenue reacceleration and margin expansion, we see potential upside from multiple expansion and potential upward estimate revisions driven by the compute business growth,” the analysts summarized.
“We believe that the improved fundamentals and the expected revenue growth and margin acceleration should warrant a positive rerating of the stock.”
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