AKAM seems to be a way to play on the cloud-computing trend. Cloud companies tend to trade at a higher multiple than traditional tech. The recently released SKYY ETF, which tracks the cloud computing industry, has an average PE multiple of over 33x EPS for a company inside the ETF. AKAM trades at a significant discount to this average. Akamai’s “Cloud Performance Solutions” are designed to, “provide on-demand access to applications and resources anywhere…cloud computing offers businesses significant cost savings, and operational scalability,” says the company.
With regard to bottom line EPS performance. AKAM has had the tendency to beat Wall Street expectations. Over the last six observations (quarters), AKAM has posted positive EPS results over the streets’ expectations. The average beat is 6.6% over the same sample.
Other risks include general pricing trends. While there are very strong secular trends for AKAM (like the mobile tsunami), pricing is a key component for the stock. Renewal waves may keep the peeks and valleys of AKAM’s prices volatile to moving downward…a massive risk
But shares have been rather volatile. AKAM recently made a low of $20, so investors should be cautious. Another catalyst includes earnings. It is important to note that AKAM has earnings February 6th of 2013 after the close. The February options, that include earnings, are implying a $4.00 range in the stock by the third Friday of February (expiration day). This is roughly a 10% move up or down.