Thursday, July 14, 2011

Today's Major Market Move - Akamai Technologies (AKAM) down 40% for the Year

It's been a few days since we've covered an individual equity so today we're going to take a look at Akamai Technologies (ticker: AKAM) for our Major Market Move feature. Akamai has had a rough 2011, dropping 40% since January while the S&P 500 index is up 2.8%. AKAM has been the third worst performer of the S&P 500 this year, after Eastman Kodak (ticker: EK) and Tellabs (ticker: TLAB). (Ignore BLL, FAST and HRML in the following chart, their stocks have all split and we're still in the process of updating our historical data).

After their stock price recovered from the 2008-2009 crisis, it collapsed again after missing estimates in the last 2 earnings announcements (although it was only by a penny each time). Here's the chart of eps actuals vs. eps estimates:

And here's the chart of % growth of eps actuals and eps estimates along with stock price:

It's been a wild ride since 2008, with the stock first dropping 40% during the financial crisis, then surging up 80% in "stimulus" phase, and finally coming back down to being essentially flat. Akamai's next earnings announcement is on 7/27, and according to this analyst on, they should meet or beat with strong forward guidance. His rational:
Streaming volume should be up -- helped by a re-up of its relationship with Netflix (Nasdaq: NFLX ) -- while the introduction of Apple's (Nasdaq: AAPL ) iCloud should provide more downloading work. (Though, as analyst Dan Rayburn rightly points out here, the bigger opportunity would be a video version of iCloud.)

There's also e-commerce and mobile to consider. A new survey from the Pew Research Center finds that 35% of Americans now own a smartphone. Of this group, 87% access the Web or email on their device with 68% using these services daily.

As far as the most recent quarter is concerned, Netflix has been around since 2003; has their growth rate surged all of a sudden in the past few months?. I also see it being too early to even decipher what the future growth rate is going to be for iCloud (it was only just unveiled a little over a month ago). Google (ticker:GOOG), who has struggled in the early part of 2011, just announced a bang-up quarter so that may bode well for AKAM also getting out of the dole drums.

(Click on the images for a larger view.
Click here for the current table of the performance of stocks in the S&P 500.
Click here for the charts of eps estimates, eps actuals and stock price.)

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