On Dec 29, 2015, we issued an updated research report on Akamai Technologies, Inc. AKAM, a global provider of content delivery network (CDN) and cloud infrastructure services.
The company has been benefiting from strong demand for cloud infrastructure solutions, security, mobile products and online video. In addition, Akamai’s partnership with the likes of Microsoft MSFT, Cisco CSCO, AT&T T and IBM are likely to generate financial synergies over the long term.
The company is well positioned to benefit from long-term Internet trends, which will continue to unfold over the next several years, including demand for higher quality video, performance-driven advertising and dynamic transactions in the cloud. The consistent growth in demand for wireless broadband is also a positive.
Akamai’s growth is dependent on several secular growth trends including IP-based video, increasing use of mobile data/apps, and security and enterprise cloud adoption, which are expected to provide the company with sustainable growth opportunities over the long term.
Moreover, Akamai remains a dominant force in the CDN and Cloud Services market as it is expected to drive significant long-term growth and shareholder value.
According to the 2014 report from Cisco, global mobile data traffic will grow at a compounded annual growth rate (CAGR) of 57% between 2014 and 2019, reaching 24.3 exabytes per month by 2019. Given this aggressive growth, mobile networks are likely to face significant congestion and will thus require technological advancements from content delivery networks.
The company has recently released its Third Quarter, 2015 State of the Internet Report that is based on data collected from the Akamai Intelligent Platform. According to the report, global connection speed has increased about 14% year over year on an average, which is a positive for Akamai.
On the flip side, Akamai might be impacted from the slowdown in its Media delivery business and also in the over-the-top (OTT) video market asthoughconsumers continue to shift from traditional videos, the rate of conversion has been lower than expected. Also, intense competition has kept pricing under tremendous pressure, particularly in the media segment, which is an added headwind.
Akamai currently has a Zacks Rank #2 (Buy).
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