- RBC Capital analyst Rishi Jaluria downgraded Akamai Technologies Inc (NASDAQ:AKAM) from Outperform to Sector Perform and reduced the price target from $100 to $85.
- The re-rating reflected the shift from Security mix-shift to Compute mix-shift as Security growth slowed.
- The analyst already had some skepticism post the Linode acquisition.
- Still, now Akamai seems to be going all-in on Compute, significantly growing its CapEx (21% of CY23E revenue) and re-allocating ~1,000 employees (10% of the headcount) to Compute.
- It seems as if Akamai is trying to compete directly with the big hyperscalers Amazon.Com Inc (NASDAQ:AMZN) AWS, Microsoft Corp (NASDAQ:MSFT) Azure, Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud Platform mostly on price, which is a challenging value proposition considering their deep moat.
- Akamai would no longer be a significant cash generator with this seemingly all-in move.
- Needham analyst Alex Henderson also reiterated a Hold on similar grounds.
- Price Action: AKAM shares traded lower by 9.69% at $79.28 on the last check Wednesday.
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