Jefferies Says That They Are Cautious On Akamai, Reiterating Hold Rating (AKAM)

Jefferies' JEF analysts said that they are taking up 2011 estimates for Akamai AKAM and raising their price target to $40, but remain cautious on the shares. The firm is now modeling 2011 revenue of $1.13 billion and EPS of $1.59 compared to $1.08 billion and $1.49 previously. They also wrote, however, that "a look at the historical price per GB (gigabyte) delivered vs. quantity of traffic required to meet the estimated level of revenue growth shows a fairly steep hurdle for traffic growth going forward, even as prices stabilize." Jefferies $40 price target implies negative returns going forward for AKAM. During today's session, the stock has gained 0.33% to $45.24. The analysts cited risks that include volume-based price pressure in Akamai's (AKAM) core video delivery business, declining cash gross margins, high requirements for future traffic growth, a looming increase in cash taxes and a high likelihood they will attract a major new competitor as revenue approaches $1 billion.