Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

Why Akamai Technologies, Inc. Stock Plunged Today

What happened

Shares of Akamai Technologies (NASDAQ: AKAM) are plunging on Wednesday morning, trading down by 14% near 1 p.m, EDT.

So what

The cloud-based content-delivery specialist reported second-quarter results on Tuesday night. Earnings fell 3% year over year, to $0.62 per share, while top-line sales increased 6.5%, to land at $609 million. Both results exceeded Wall Street's consensus estimates, but shares fell anyway because management's third-quarter sales guidance came in below expectations.

The Street was looking for next-quarter revenues near $619 million, but the official guidance range topped out at $616 million. Akamai's non-GAAP earnings guidance, on the other hand, was right in line with Wall Street's expectations at roughly $0.61 per share.

Image source: Getty Images.

Now what

Investors were spooked by a soft revenue forecast, to the point of ignoring perfectly solid second-quarter results and a respectable third-quarter bottom-line projection. The revenue guidance includes about $3 million of negative currency-exchange effects, and Akamai is up against a difficult year-over-year comparison since the third quarter of 2016 included online media streaming of the Rio Summer Olympics.

I would argue that the price drop today is an overreaction to a perfectly understandable revenue slowdown. Note that Akamai supplemented its sputtering content-delivery services with a 35% year-over-year jump in security sales, taking the whole company in a different direction. Investors would be smart to treat this drop as an invitation to learn more about Akamai, and maybe even start a long position.

10 stocks we like better than Akamai Technologies
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Akamai Technologies wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.