Akamai Takeover: Verizon or IBM?
by Justin Dove, Investment U Research
Monday, October 10, 2011
According to Bloomberg research, Akamai (Nasdaq: AKAM) is the most talked-about takeover candidate since 2005. That takeover chatter was rekindled this week as shares hit a new 52-week low at $18.25 per share.
Shares are currently trading in the low $20s, following a slight pop based on the rumors. The stock has a 52-week high of $54.65, which was hit in late 2010. Since then, the stock is on a steady decline. Market value for Akamai plummeted to about $4 billion after reaching $9.9 billion last December.
But Trefis.com claims the fair value of the stock is almost $31 per share. And the low valuation could be enticing to potential suitors.
What is Akamai?
Akamai is a company that speeds up internet content delivery. According to its website, “Akamai routinely delivers between 15 and 30 percent of all web traffic, reaching more than four terabits per second.”
Its customers include Apple (Nasdaq: APPL), Netflix (Nasdaq: NFLX), NFL.com and MLB.com streaming videos and a who’s who list of websites and internet-related companies.
The stock has likely tanked over the last 12 months because of lowered expectation on company performance. After the second quarter, analysts predicted an EPS of $1.57 for this year and $1.79 in 2012. The expectations have now been lowered to $1.45 this year and $1.62 next year.
Akamai has also faced increasing pressure from competitors, having renewed some of its content delivery contracts at lower prices. Late in 2010, the stock was trading with a P/E ratio in the 60s, however currently the P/E of roughly 23 is very reasonable for an internet technology company that should experience more growth.
IBM and Verizon: Likely Takeover Candidates for Akamai
Bloomberg claims IBM (NYSE: IBM) and Verizon (NYSE: VZ) are the most likely takeover candidates. It also cites SunTrust Robinson analyst Rodney Ratliff, who thinks the company might not accept any offers under $40 per share.
And although the stock suffered heavy losses, the company is still experiencing success. Akamai is projected to post an increase in net income for a fifth consecutive year at 13-percent growth over 2010.
Even if Akamai isn’t taken over, its current price may represent a nice entry point for investors that aren’t totally spooked by the crisis in Europe.
Good investing,
Justin Dove
Article by Investment U
