) is a content delivery company that delivers web content for its
customers besides offering additional value added services like
advertising solutions and site acceleration. It competes with other
players like InterNAP Network Services (
), Limelight Networks (
) and Level 3 (
) in this business and delivers close to 20% of global web traffic.
Our price estimate for Akamai stands at $37.11
, which is about 23% below the current market price.
The company recently released its Q4 2010 earnings, and we have
increased our price estimate to
based on continued fast growth in revenues across all verticals.
Our new estimates value the media content delivery segment as the
most valuable for Akamai. We previously had e-commerce as the most
valuable segment, but the rebound in media revenues has impressed
us leading us to change our forecasts and the way we view this
We now estimate that
media vertical constitutes 34% to Akamai's value
compared to 31% for e-commerce (online shopping)
. The revenue rebound has been significant in 2010 with both
customers and revenue per customer growing.
Media Growth Impresses
For Akamai, revenues from media content delivery segment grew by
25% in Q4 2010 compared to same quarter a year ago and 10%
sequentially. The company stated it is witnessing growth in digital
media content and that traffic volume growth is being driven by an
increasing number of long-form entertainment (e.g. movies) moving
online and the amount of HD video increasing. The company also
renewed multi-year deals with 80% of its top 10 customers including
Netflix. For Netflix, the company will be supporting its streaming
both domestically and internationally.
A recent study estimated that at peak times, Netflix constitutes
about 20% of U.S. internet traffic. This is a huge figure and
depicts the extent of the impact that this type of entertainment
can have on internet traffic. Akamai expects media traffic to
increase several times over in the future and plans to scale its
Do you agree and think that media growth will overshadow
e-commerce growth which also benefits from several value added
services? You can modify our forecasts to see how faster or slower
growth in the media vertical can impact Akamai and leave comments
You can see
the complete $37.11 Trefis price estimate for
Akamai's stock here.