Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our thesis.
What: Shares of Akamai Technologies, (NASDAQ: AKAM) jumped 20% Thursday after the cloud services company turned in solid fourth-quarter results.
So what: Quarterly revenue rose 15% year over year, to $436 million -- or 20% if you adjust for the early 2013 sale of its ADS business -- which translated to a 10% increase in adjusted net income to $0.55 per diluted share. Analysts, on average, were looking for earnings of $0.52 per share on sales of $422.39 million.
Better yet, Akamai expects Q1 revenue in the range of $426 million to $442 million, and adjusted earnings per share of $0.51 to $0.55. Both ranges sit well above Wall Street's expectations, which call for earnings of $0.49 per share on sales of $412.8 million.
Now what: But that's not all. Remember, Akamai shares plunged three months ago when it issued weaker-than-expected guidance, thanks partly to the potential impact from a price renegotiation with their largest media customer (presumed to be none other than Apple).
According to management, today's strong guidance includes that customer's new pricing terms retroactive to January 1. On that note, it doesn't include any impact from its yet-to-be-closed acquisition of Prolexic, which Akamai already stated is expected to be dilutive to earnings per share by $0.06 to $0.08 in the first year.
Even so, it's hard to blame investors for breathing a big sigh of relief today. But with shares trading around 23 times next year's estimated earnings, I'm content staying on the sidelines to wait for a more attractive long-term entry point.