Analyst Note| Matthew Dolgin, CFA |
As it has done nearly every quarter for the past several years, Akamai beat consensus revenue expectations, as compiled by FactSet, by a wide margin in the fourth quarter. Currency tailwinds and inflated costs tempered our enthusiasm for the results somewhat, but more relevant, in our view, is management’s expectation for some deceleration in the fast-growing cloud security business and our reservations that the media business will build upon the traffic spike it saw due to the pandemic. Until the pandemic hit, security had been the sole source of sales growth for the past half decade, and given our view that the core content delivery network, or CDN, business lacks a moat, we believe security is critical to keep the top line growing at a high rate. We don’t intend to materially change our $72 fair value estimate and view the stock as overvalued.