3 Reasons to Sell Akamai
By
Dave Mock
September 19, 2008
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A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic is never beneficial to investors, it's good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 115,000 members have weighed in on more than 5,500 stocks, sharing bullish and bearish opinions alike.
In the case of network optimization firm Akamai (Nasdaq: AKAM), a total of 2,289 members have weighed in on its chances of success. I've already plucked out some of the bullish rationale backing Akamai today, so here are three counterpoints to consider, courtesy of CAPS:
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Competition. Akamai's competition in content delivery has been increasing over the years with crossover players like AT&T (NYSE: T) and Amazon (Nasdaq: AMZN) recently joining the hunt.. And a recent increased partnership between competitor BitGravity and Tata Communications (NYSE: TCL) has some investors worried that the pairing could doom Akamai -- but not everyone. Still, many investors see new competition coming in from all sides as reason to be cautious.
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Slowing revenue growth. Media and entertainment companies attempting to build Web presence and take on Apple's (Nasdaq: AAPL) iTunes are cutting back on spending and slowing short-term growth for a large part of Akamai's revenue. Revenue growth still remains positive, but management lowered guidance for 2008, dropping the expected range by about $20 million.
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Cooling sector. The recent IPO for Web-hosting player Rackspace got no love from the market, and the media content delivery networks niche has come under pressure from a weakening economic environment. Even Dell (Nasdaq: DELL) saw weaker global demand in the current quarter, reinforcing the belief that liquidity concerns could tighten capital spending, which is not what companies such as Cisco (Nasdaq: CSCO) like to hear.
Of course, Akamai has thrived through uncertainty before. But the questions about whether the company can continue its upward run is why CAPS is such a great resource to augment your own analysis.
To see what the very best CAPS members are saying now about Akamai, just click on over to Motley Fool CAPS and have a look -- it's all free, and even open to your opinion.
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