Valens Equity Weekly Insights and Inflections for May 3, 2022

May 3, 2022

  • Akamai Technologies, Inc. (AKAM) has been rapidly growing its high-margin cybersecurity business. Uniform Accounting highlights the company’s profitability potential as it grows these businesses, a trend the market seems to be missing, indicating equity upside is warranted.
  • While Akamai’s legacy CDN business is viewed by the market as a saturated utility, the company has been pivoting towards higher margin businesses like cybersecurity and Edge Computing, giving it the ability to reinvigorate growth and returns. As the cybersecurity business continues growing towards overtaking the CDN business, Uniform ROA should start accelerating, which the market is not pricing in at all.
  • Akamai’s management is aligned to focus on revenue, non-GAAP operating income, and non-GAAP EPS, which will lead management to profitably grow the business. These metrics should drive strong ROA performance.
  • Management confidence in the Q4 earnings call about their cybersecurity and Edge Computing businesses support ROA expansion and continued growth.
  • HCA (HCA) is being removed from the Conviction Long List. The company is struggling with staffing and wage pressures, so we are closing up 57%.

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