Shares of Akamai Technologies Inc. (AKAM) surged 18 percent higher on Thursday after the company’s fourth quarter earnings report beat Wall Street’s expectations.
Strong online commerce sales during the holiday season enabled Akamai, which provides Web traffic management services, to earn 44 cents per share excluding items for the quarter on revenue of $212.6 million.
Back in October, Akamai forecast Q4 revenue to be in the $202 million to $210 million range. Analysts polled by Thomson Reuters estimated the company would earn 40 cents per share on revenue of $205.4 million.
Chief Executive Paul Sagan said the strong fourth-quarter growth was attributed to customers’ being more focused than ever on making Internet channels work well.
It’s not surprising then that the fourth quarter would be a good one for Akamai as the holiday season is the bread and butter period for many of its customers.
The first quarter is not expected to be as strong as customers scale back on spending after the holiday season surge, said Sagan. Still he doesn’t expect the company to take a bigger-than-usual hit.
That the company delivered an earnings surprise in the face of a fierce recession is likely what got investors thinking that now is the time to buy the stock. “As the external environment has become more challenging, we’re pleased that we were able to grow revenue and earnings throughout the year while broadening our portfolio of solutions to improve Internet performance for our customers,” said Mr. Sagan.
The company gained 50 new customers under long-term service contracts during the fourth quarter, an increase of 8 percent from a year ago.
The Internet is becoming more and more important tool for various businesses and Akamai routinely delivers between 10 and 20 percent of all Web traffic. More than 2,000 enterprises trust Akamai to make the Internet a safe, reliable place to do business. The company enables $50 billion in annual e-commerce revenue and is used by over 70 percent of the top online retailers.
Others entrusting their operations to Akamai are financial services firms, online travel sites, media and entertainment companies, and software and technology companies. The list is sure to grow.
Akamai’s management was upbeat about the fourth quarter results and said it reflected the long-term growth prospects of the Internet. However they remain cautious about the economy in the near-term and said they wouldn’t provide guidance for fiscal 2009 because the continuing economic slump makes it tough to predict long-term performance.
AKAM shares may be a good place to park some money.
The company is financially healthy and has a dominant position in its industry. The Internet will continue to grow and with it so too will Akamai’s business.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.
