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Akamai Technologies (AKAM) Up 7%: Can the Rally Continue?

Akamai Technologies, Inc. AKAM shares surged about 7.3% in yesterday's trading session.

In the past six months, the company's shares have gained 61.6%, outperforming the industry 's growth of 8.4%.

Will the recent positive trend continue driving the stock over the long haul or is it due for a pullback? Before we discuss how investors and analysts have reacted of late, let's take a quick look at the recent fundamentals and trends in order to get a better hold on the catalysts.

Stellar Q4 Results

Akamai Technologies delivered non-GAAP earnings of 69 cents per share for fourth-quarter 2017, up 1% adjusted for foreign exchange and the dilutive effect of the SOASTA and Nominum acquisitions. It also surpassed the Zacks Consensus Estimate of 63 cents per share and increased 11.3% on sequentially.

Revenues of $663 million beat the Zacks Consensus Estimate of $647 million and increased 8% from the year-ago quarter and almost 6.8% from the previous quarter. Notably, both the top and the bottom line came ahead of management's expectations. Strong media division traffic and growing adoption of cloud-based security solutions were the major tailwinds.

Positive View

Management expects first-quarter 2018 revenues to be in the range of $647-$659 million. The Zacks Consensus Estimates was pegged at $651.2 million.

The company anticipates first-quarter 2018 non-GAAP EPS to be in the range of 67-70 cents per share. The Zacks Consensus Estimates is pegged at 61 cents.

In 2018, the company projects revenues of roughly $2.67 billion to $2.71 billion. The Zacks Consensus Estimate for the same is pegged at $2.69 billion.

Non-GAAP earnings per for 2018 is expected to be in the range of $2.90-$3.00. The Zacks Consensus Estimate for the same is pegged at $2.60 per share.

Other Growth Drivers

We expect the huge level of network traffic catered to by Akamai Technlogies' cloud delivery platform to be a key top-line booster. A growing customer base, Nominum's acquisition, improvised portfolio of solutions and robust over-the top (OTT) content viewing segment are other positives.

Management noted that growing adoption of Kona Site Defender, Prolexic offerings and the company's expansion in the fields of bot management backed the impressive performance of the cloud security solutions segment.

Bot Manager Premier, which uses machine learning technologies acquired from Cyberfed to distinguish between human users and machines, has also witnessed accelerated growth. The company's Enterprise Threat Protector solution that blocks access of employees to infected sites is anticipated to gain from the Nominum acquisition.

The company is also optimistic about the robust OTT content viewing segment. Management is positive about the increase in OTT audience. The addition of a new streamlining technology that provides an experience which is a few seconds ahead of satellite and new media client software meant for better viewing experience will aid long-term growth.

Lastly, we believe that rising demand for cloud infrastructure solutions, security, mobile products and online video as well as adoption of cloud services on a large scale by data centers provide significant growth opportunity for the company.

Upward Estimate Revisions

Akamai Technologies has been witnessing upward estimate revisions, reflecting analysts' optimism. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 15% upward to $2.98 per share, over the last 60 days.

Bottom Line

Notably, the stock carries a Zacks Rank #2 (Buy). Additionally, the stock has long-term earnings per share growth rate of 12.8%.

In our opinion, the stock deserves a place in investor's portfolio and we are expecting an impressive return from the stock in the next few months.

Some other top-ranked stock worth considering is Facebook, Inc. FB , Paycom Software, Inc. PAYC and NVIDIA Corporation NVDA , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term expected EPS growth rate for Facebook, Paycom Software and NVIDIA are 26.51%, 25.75% and 10.25%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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