Akamai Technologies Stock Up 26%, Buy Or Wait?

Akamai Technologies (AKAM) stock is up 25.9% in 5 trading days. The stock looks fairly priced at the moment. Consider the following data:

• Size: Akamai Technologies is a $13 Bil company with $4.1 Bil in revenue currently trading at $90.61.
• Fundamentals: Last 12 month revenue growth of 4.2% and operating margin of 15.4%.
• Liquidity: Has Debt to Equity ratio of 0.4 and Cash to Assets ratio of 0.1
• Valuation: Akamai Technologies stock is currently trading at P/E multiple of 25.7 and P/EBIT multiple of 18.9
• Has one instance since 2010 where it dipped >30% in < 30 days and subsequently returned 80.4% within a year. See AKAM Dip Buy Analysis.

While we like to ride the momentum if the fundamentals check out – for AKAM, see Buy or Sell AKAM Stock – we are wary of bull traps. Specifically, it is worth trying to answer if things get really bad, and AKAM drops 20-30% to $63 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

A single stock can be risky, but there is a huge value to a broader, diversified approach we take with the Trefis High Quality Portfolio. We go beyond just equities. Is a portfolio of 10% commodities, 10% gold, and 2% crypto in addition to equities and bonds likely to return more during the next 1-3 years, and protect you better if markets crash 20%? We have crunched the numbers.

Below are the details, but before that, as a quick background: AKAM provides cloud services that secure, deliver, and optimize content and applications, protecting infrastructure, websites, APIs, and users from cyberattacks and online threats globally.

2022 Inflation Shock

• AKAM stock fell 42.0% from a high of $121.92 on 20 April 2022 to $70.75 on 13 March 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 January 2024
• Since then, the stock increased to a high of $128.32 on 11 February 2024 , and currently trades at $90.61

 
2020 Covid Pandemic

• AKAM stock fell 21.9% from a high of $102.56 on 19 February 2020 to $80.05 on 12 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 16 April 2020

 
2018 Correction

• AKAM stock fell 36.9% from a high of $71.12 on 7 February 2017 to $44.91 on 21 August 2017 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 March 2018

 
2008 Global Financial Crisis

• AKAM stock fell 84.3% from a high of $59.15 on 8 February 2007 to $9.29 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 11 February 2014

 
It is a good thing to keep in mind how low AKAM could go during a downturn. And you should also check how the stock fared when compared with the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 — the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.