Here’s Why Akamai Stock Has Failed To Outperform The S&P Since 2017

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Akamai

Akamai Technologies Inc. (NASDAQ: AKAM) stock price gained a little under 30% from $65 in 2017 end to around $82 currently, primarily due to favorable changes in its revenues. During this period, the company also witnessed a 7% drop in its outstanding share count, and despite a drop in the P/S multiple, the company’s stock price has returned 27% since 2017. However, over the same period, the S&P 500 returned around 40%, meaning that Akamai stock has underperformed the index since 2017-end.

In our interactive dashboard, Why Akamai Stock Moved: AKAM Stock Has Gained 27% Since 2017, we break down the factors behind this move.

(A) AKAM’s Total Revenue has increased 44% from $2.5 billion in FY 2017 to $3.6 billion on an LTM basis

  • AKAM’s total revenue has risen consistently from $2.5 billion in FY 2017 to $3.5 billion in FY 2021.
  • Sales have maintained their rise so far in FY ’22, currently standing at $3.6 billion on an LTM basis.
  • Akamai is a content delivery network, cybersecurity, and cloud service company, providing web and Internet security services.
  • The company as of FY ’21 reports sales under only one operating segment: providing solutions to power and protect digital experiences.
  • For additional details about AKAM’s revenues and comparison to peers, see Akamai (AKAM) Revenue Comparison
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(B) Revenue per share (RPS) increased 54% from $14.53 in 2017 to $22.42 currently

  • AKAM’s revenue rose from $2.5 billion in 2017 to $3.6 billion currently, while the outstanding share count dropped from 171.4 million in 2017 to under 160 million currently.
  • Due to this, RPS has risen from $14.53 in FY ’17 to $22.42 currently.

(C) Price-To-Sales (P/S) multiple for AKAM rose strongly from 4.2x in 2017 to 5.4x by 2021 end, but has pulled back to 3.7x currently, even lower than its 2017 level

  • AKAM’s P/S multiple rose to around 5.4x by late 2021, on the back of rising investor expectations surrounding increased demand for the company’s products and services.
  • However, due to the current geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 3.7x.
  • For additional details about the company stock returns, and comparison to peers, see Akamai (AKAM) Stock Return Comparison.

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 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 AKAM Return -9% -30% 23%
 S&P 500 Return -4% -21% 69%
Trefis Multi-Strategy Portfolio -6% -21% 213%

[1] Month-to-date and year-to-date as of 9/22/2022
[2] Cumulative total returns since the end of 2016

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