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Akamai Drops on Weaker-Than-Expected Guidance

Akamai Technologies reported fourth-quarter results that beat expectations but gave an outlook that some analysts said looked disappointing.

Akamai Technologies  (AKAM) - Get Akamai Technologies, Inc. Report shares dropped on Wednesday after the cybersecurity and network services provider gave conservative guidance for 2021, which led some Wall Street analysts to downgrade the stock.

Shares of the Cambridge, Mass., company at last check fell 12% to $104.30.

Akamai reported fourth-quarter adjusted earnings of $1.33 a share, exceeding the FactSet analyst consensus by 2 cents a share. Revenue of $846 million beat the consensus forecast of $830.3 million.

For first-quarter 2021, the company expects adjusted earnings between $1.28 and $1.31 a share. Revenue should grow 5% to 7%, to between $822 million and $836 million, Akamai estimated.

FactSet's survey for Q1 is looking for adjusted profit of $1.30 a share on revenue of $828.7 million.

Analysts at J.P. Morgan downgraded the stock to neutral from overweight, and the price target on the stock to $117 from $125, TheFly reported.

KeyBanc Capital Markets analysts said Akamai's outlook was in line with expectations, “which could be viewed as disappointing to bulls.” KeyBanc has an overweight rating on the stock.

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Piper Sandler said overweight-rated Akamai's revenue "was modestly disappointing overall against investors’ higher expectations.”

Analysts at Raymond James said Akamai's overall guidance was generally in line but the implied guidance for the security business “was a bit disappointing.”

The technology security company also unveiled an organizational restructuring. It formed two new business units: Security Technology and Edge Technology, beginning March 1.

Akamai named Adam Karon chief operating officer and general manager for Edge Technology and Rick McConnell president and general manager of Security Technology.

Analysts at both KeyBanc and Cowen said that reorganization is a positive step for the company. 

Growth is expected to decelerate, but a reorganization is “a step in the right direction, though we wait for more clarity around the long-term fundamental profile," KeyBanc said.

And Akamai named Robert Blumofe chief technology officer. He's currently executive vice president for platform and general manager of the enterprise division.