Pacific Crest On Akamai: 'Still An Opportune Time To Build Positions'

Pacific Crest said it's still an opportune time to acquire/build positions in the shares of Akamai Technologies, Inc. (NASDAQ: AKAM).

"We believe when traffic growth improves, the valuation multiple should expand. At just 9.1x our below-consensus 2016 adjusted EBITDA estimates vs. its three-year range of 7.8x to 15.1x, we believe shares are attractively valued," analyst Michael Bowen wrote in a note.

Bowen noted Akamai's media traffic was down 21 percent year-over-year in May, which he believes continues to highlight that an improvement in the second half of 2016 will likely be gradual, not dramatic.

"We believe that, excluding Akamai's big-two customers, the remaining customers are growing potentially as fast as the industry," Bowen highlighted.

The analyst noted that Microsoft Corporation (NASDAQ: MSFT) and Comcast Corporation (NASDAQ: CMCSA) are large customers of Akamai, potentially the third- and fourth-largest customers at about 2-3 percent of total revenue each.

Despite some in-house efforts by both of these two customers, Akamai has stated its share of traffic from its No. 3 and 4 customers has increased and highlights customers' reliance on Akamai's services and the importance of Akamai to the CDN (content delivery network) ecosystem.

In addition, Bowen said the recent announcements by Microsoft and NBC underscores the DIY trend is not the only path. Recently, Microsoft announced to Azure customers the availability of Akamai's CDN through Microsoft Azure. NBC Sports announced that Akamai would be included in a partnership for NBC Sports Playmaker Media.

Bowen maintained his Overweight rating and $71 price target on the stock.