Buy or Sell Akamai Technologies Stock?

We believe there are only a couple of things to fear in AKAM stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $14 Bil in market cap, Akamai Technologies provides cloud services that secure, deliver, and optimize content and applications globally, protecting infrastructure, websites, APIs, and users from cyberattacks and online threats.

[1] Valuation Looks Moderate

This table highlights how AKAM is valued vs broader market. For more details see: AKAM Valuation Ratios

[2] Growth Is Moderate

• Akamai Technologies has seen its top line grow at an average rate of 5.2% over the last 3 years
• Its revenues have grown 5.4% from $4.0 Bil to $4.2 Bil in the last 12 months
• Also, its quarterly revenues grew 7.4% to $1.1 Bil in the most recent quarter from $1.0 Bil a year ago.

This table highlights how AKAM is growing vs broader market. For more details see: AKAM Revenue Comparison

[3] Profitability Appears Strong

• AKAM last 12 month operating income was $628 Mil representing operating margin of 14.9%
• With cash flow margin of 36.1%, it generated nearly $1.5 Bil in operating cash flow over this period
• For the same period, AKAM generated nearly $452 Mil in net income, suggesting net margin of about 10.7%

This table highlights how AKAM profitability vs broader market. For more details see: AKAM Operating Income Comparison

[4] Financial Stability Looks Strong

• AKAM Debt was $5.7 Bil at the end of the most recent quarter, while its current Market Cap is $14 Bil. This implies Debt-to-Equity Ratio of 39.3%
• AKAM Cash (including cash equivalents) makes up $1.2 Bil of $11 Bil in total Assets. This yields a Cash-to-Assets Ratio of 10.3%

[5] Downturn Resilience Is Moderate

AKAM saw an impact slightly 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.

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 $100.04

 
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

 
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

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read AKAM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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