Akamai Technologies Downgraded on Balanced Risk-Reward by Citi Analyst
2022.07.22 18:30
Akamai Technologies (AKAM) Downgraded on Balanced Risk-Reward by Citi Analyst
By Sam Boughedda
Shares of Akamai Technologies (NASDAQ:AKAM) were downgraded to Neutral from Buy at Citi on Friday, lowering the price target to $105 from $118 per share.
A Citi analyst, in a note on software stocks, said increasing odds of a global recession are becoming harder to ignore, and fundamental softness is now visibly manifesting in fieldwork, prompting estimate cuts across the firm’s coverage.
“CY23E/CY24E topline growth metrics move ~8% lower for our group, with revs ~5% below consensus on average, while OPMs drift ~100bps lower on average vs. prior, which in aggregate recalibrate lower our PTs and bull/bear scenarios. We also reduce CY22E for AKAM, DT, and tweak CYBR, VRNS to more appropriately reflect incremental FX headwinds from the strengthening USD against this cohort’s sizeable local currency exposure, with near-term reported guidance risk for AKAM, DT,” wrote the analyst.
The analyst added: “We move to the sidelines on AKAM seeing a balanced risk/reward, where FX-related guide risk to CY22E, our low conviction in Delivery segment growth trends ameliorating, diminished confidence in organic security growth prospects (ie. excluding Guardicore), are offset by an undemanding multiple implying 5-6% earnings and FCF yield on our reduced forecasts. News reports of a financial sponsor driven takeout bid while improving downside support to valuation, appears less intriguing to us given the rising cost of capital, and AKAM’s already ~30% op margin profile.”
Despite the downgrade, Akamai shares are trading 0.15% above Thursday’s close, although they are down 19% in 2022.
