The number of Akamai's (
) online business shopping customers has been rising and we expect
the growth to continue driven by increasing broadband penetration,
sustained e-commerce growth, and Akamai's vast distribution and
Akamai operates a global network of servers that help large
online shopping retailers like Amazon, Nordstrom, Foot Locker, and
consumer-focused companies like Cathay Pacific, Audi, and Best Buy
deliver content to their end users. It competes with players like
InterNAP Network Services (
) and Limelight Networks (
) in the online content delivery business.
While we expect Akamai's online shopping client list to increase
to 2,550 by 2016, the Trefis community predicts more accelerated
growth to over 3,300, representing an upside of 9% to our price
estimate for AKAM.
We currently have a
Trefis price estimate of $31.11 for Akamai's
, about 38% below the current market value of $50.
Sustained E-commerce Growth
The penetration levels of online media as well as electronics
& general merchandise (EGM) in the US are rising. This can be
attributed to several factors: advancement in online security
through use of encryption, increasing broadband penetration, lower
costs of setting up online business, continued brick-and-mortar
expansion into online venues, and popularity of online retail among
Strong Distribution and Competitive Pricing Benefits
Akamai has a vast number of servers distributed over hundreds of
networks, cities, and countries, which enables Akamai's
infrastructure to be within the last mile, irrespective of where a
customer is located. This difference in Akamai's approach vs. the
centralized data center approach taken by many of Akamai's
competitors is what sets the company apart and affords significant
advantages in terms of driving better speed, scalability and
reliability, in addition to lower cost.
Akamai has historically charged premium prices to its customers
for fast and secure delivery of their web content. However, the
company is becoming increasingly competitive on pricing,
particularly on video content, in an effort to attract more
customers and traffic to its network.
Trefis Community Forecast
The Trefis community predicts that the number of Akamai online
shopping business customers will increase from 1943 in 2010 to 3308
by 2016, compared to the baseline Trefis estimate of an increase
from 1734 to 2553 during the same period. The community estimates
imply an upside of 9% to the Trefis price estimate for Akamai's
stock, although we remain well below current market price.
complete analysis for Akamai's stock is here