FBR analyst David Hilal has reduced his rating and price target on Akamai after the content delivery network company reported disappointing earnings and issued even more dismal Q3 guidance. AKAM’s results were as follows:
Revenue: $194.0 million vs. $196.7 million consensus, $194-$199 million guidance
Normalized EPS: $0.41 vs. $0.41 consensus, $0.41-$0.42 guidance
Net new customers: 53 vs. 26 (AmTech) 30 (Canaccord Adams)
Q3 Revenue: $193 million-$198 million, vs. $206.6 million consensus
Q3 EPS: $0.39-$0.40, vs. $0.42 consensus
2008 Revenue: $785 million-$800 million, vs. $817.1 million consensus
2008 EPS: $1.63-$1.69, vs. $1.70 consensus
FBR’s Hilal inisted that the firm’s actual Q2 results weren’t that bad, and was pleased by a strong gross margin, higher ARPU, and robust customer growth. But AKAM guidance was weak and Hilal was deeply concerned about AKAM’s ability to perform in a weakening macro environment:
While the company reported decent 2Q results, it appears the tough economic environment is catching up to AKAM greater than we thought, and it is reflected in management’s outlook and lowered guidance. Also, given that 3Q is AKAM’s seasonally weakest quarter, we see no urgency to own the shares. We think AKAM’s business and shares will be a major beneficiary with an improving economy. However, until we feel more comfortable about the magnitude of the adverse impact that the economy is having on the business, we prefer to move to the sidelines.
Hilal downgrades AKAM from Outperform to Market Perform and drops his price target from $50 to $33.
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