Upgrades Spark Akamai Shares Ahead of Earnings

Akamai shares got a nice boost Monday after a pair of influential analysts upgraded the content deliver network’s stock ahead of the company’s fourth-quarter earnings report due out later this week.

Pacific Crest analyst Chad Bartley bumped Akamai (NASDAQ: AKAM) to an “outperform” rating from “market perform” and set a 12-month price target of $32 a share.

Meanwhile, Wedbush analyst Kerry Rice upgraded Akamai to an “outperform” rating from “neutral” and boosted his 12-month price target to $30 a share from $25 a share.

Akamai shares rallied up $1.17 a share, or 5 percent, to $25.87 in heavy trading volume Monday afternoon. The stock had moved up to a 52-week high of $27.28 a share in January after plummeting to a low of $13.40 a share this time last year.

“Our ongoing checks increase our confidence in Akamai’s 2010 and longer-term outlook,” Bartley wrote in a research note. “We believe its pricing strategy is helping the company retain and add customers and increase its market share.”

Rice added that the Cambridge, Mass.-based firm’s “current margin structure is sustainable over the next 12-24 months,” in his research note and predicts that Akamai’s new low-margin businesses “should not impact margins overall for the 1-2 years.”

In early December, Akamai gave analysts and its investors reason for confidence when it preannounced better-than-expected sales and earnings for its fourth quarter.

Akamai official told the Street to expect sales in the range of $230 million to $235 million in its final quarter of 2009, up from the prior estimate of between $217 million to $224. It also told analysts to expect profits of roughly $0.43 a share, better than its earlier forecast of between $0.39 and $0.41 a share.

“The first two months of the fourth quarter tracked above our expectations,” CFO J.D. Sherman said in December. “We have been seeing stronger volume growth this quarter as compared to the same quarter last year in our commerce and media verticals, and we anticipate this trend will continue through the end of the year.”

Akamai will release its fourth-quarter results after the bell Wednesday.

Despite increased competition from the likes of LimeLight (NASDAQ: LLNW), CDNetworks and Amazon, through its CloudFront content delivery network, Akamai continues to grow at a respectable pace.

Last quarter, the company managed to grow its number of customers under recurring contracts by 8 percent to a total of 3,031 and now more than 28 percent of its business is generated outside the U.S.

Following Monday’s upgrades, 12 of the 23 analysts covering the stock maintain either a “hold” or “neutral” recommendation while nine rate it a “buy” or “strong buy.”

Larry Barrett is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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