Akamai shares sink on fear of slower growth
Shares of Akamai Technologies Inc. sank today after analysts said the troubled economy and growing competition could limit the digital media delivery company's growth.
Shares of Cambridge-based Akamai dropped $1.61, or 9.4 percent, to $15.51 in afternoon trading on the Nasdaq Stock Market. The stock has traded in a 52-week range of $14.60 to $41.45.
The company's technology and services speed delivery of music, software, rich media Web sites, and other Internet content that consumes extra bandwidth.
"We believe Akamai's slowing M&E (media and entertainment) traffic growth is partially due to budget reductions and reallocations of Internet initiatives of its large traditional M&E customer base," wrote Wedbush Morgan Securities analyst Kerry Rice in a note to investors.
The analyst also noted that increased competition in the sector has shortened contract lengths, threatening some of Akamai's deals, and that its customers are moving toward using several different content delivery providers.
Rice cut his rating on the stock to "Hold" from "Buy" and lowered his price target to $20 from $23.
Kaufman Bros. Equity Research analyst Raimundo Archibold wrote in a research note that he also expects tougher competition and the slowing economy to cut into Akamai's returns.
Competitors will use lower prices to lure new customers, but so far Akamai hasn't been willing to compete on price, Archibold wrote.
"We see content owners using the aggressive pricing models of competitors as a check against Akamai pricing, but still being willing to pay a premium to work with the far and away market leader," the analyst wrote. "The question is, however, in a weakening economy does this willingness likewise weaken?"
Archibold kept a "Hold" rating on the stock but cut his price target to $25 from $33. (AP)
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