Why Akamai is a smart play in cloud computing
February 18, 2013
Grazed from MSN Money. Author: Jim J. Jubak.
I think Akamai’s (AKAM +1.64%) almost 18% plunge on Feb. 7 after what Wall Street decided was a disappointing fourth-quarter earnings report has taken some of the risk out of this stock. You may have to be patient, since the company is entering one of those capital-intensive periods that can cut margins, but for investors willing to hold past a quarter or two (or for investors who can time their entry point with more exactitude that I usually can), Akamai is one of the best ways to play the growth of cloud computing and what looks like a coming explosion in video on demand as Netflix (NFLX +1.13%), Amazon.com (AMZN -1.54%) and Google (GOOG +0.64%) gear up to go head-to-head-to-head? in that space.
On Feb. 6, Akamai announced fourth-quarter earnings of 54 cents a share, 5 cents a share above the Wall Street consensus, and revenue of $378 million. That represented revenue growth of 17% but fell slightly below the Wall Street consensus of $381 million for the quarter. Gross margins of 82% and operating margins of 33.2% were both ahead of the consensus of 81.1% and 32.3%, respectively…
There were a few dings in the quarter. Revenue from the company’s media and entertainment and its commerce segments came in a little light — at $158 million versus the consensus of $163 million and $90 million versus the consensus of $92 million, respectively — in a quarter when the company typically outperforms…
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