Why Akamai Shares Might Keep Climbing

Why Akamai Shares Might Keep Climbing

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Akamai Technologies climbed 1% today after D.A. Davidson upgraded the Internet content delivery technologist from neutral to buy.

So what: Along with the upgrade, analyst Mark Kelleher raised his price target to $62 (from $55), representing about 20% worth of upside to yesterday's close. While contrarian investors might be turned off by the stock's bump over the past few months, Kelleher believes that there's plenty of room to run given the rapidly growing long-term demand for fast digital content over the Internet.

Now what: D.A. Davidson thinks that Akamai is in a particularly good spot to capitalize on sector tailwinds. "To its installed base of loyal content customers Akamai is now offering value-added software applications to address other content provider needs in addition to basic delivery," noted D.A. Davidson. "These new services, now over 50% of total revenue, increase gross margins and reduce its exposure to CDN pricing swings." Of course, with Akamai shares up about 50% over just the past six months and trading at a 20-plus forward P/E, I'd wait for some of the excitement to fade before making too big of a bet.

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The article Why Akamai Shares Might Keep Climbing originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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