Friday, May 18, 2007

Citigroup comments on couple of fast movers

Citigroup is out with positive comments on couple of fast movers:

- First, they believe the recent pull back in Akamai (NASDAQ:AKAM) represents a buying opportunity. AKAM's 1Q results missed expectations but fundamentals were robust. Some investors were anticipating 1Q to be AKAMs 6th consecutive beat & raise qtr; results at the hi-end of guidance resulted in a ~20%+ drop in the shares.

Firm estimates AKAM's 07 rev and EPS growth at ~45% with 08 rev growth of 34% and EPS of 38%. Based on their ests, AKAM trades at a P/E of 34x 07 and 25x 08. If AKAM were to maintain its current 07 multiple on 08 ests it would yield a $59 share price or 37% higher than the current level. Citi thinks AKAM shares can provide an attractive return without exceeding current ests and expects the shares to rebound from current oversold condition.

AKAM competitor Limelight's pending IPO (S-1 filed March 22nd) will keep competition concerns top-of-mind but the firm thinks market demand and AKAM's differentiated offering will trump such worries.

- Secondly, coming out of restriction, Citi is updating their view on Riverbed (NASDAQ:RVBD) taking their rating to Buy from Hold. Post an impressive March and with a new product cycle at its back, the company's tech advantage is lengthening and momentum continues to build. Future catalysts include Steelhead Mobile, channel expansion, and an increased storage presence.

Riverbed continues on its hyper-growth track while progressing toward it starget operating model. While an opex catch-up may result in a margin pause for June, the company is on track to exit 2007 at ~20%+ Op Mgn vs the 20-25% LT target. Citi's prior CQ2 estimates of $43M and $0.07 are now $49M and $0.12. Tgt is raised to $52 from $34.

Notablecalls: Of the two calls, AKAM's certainly my favourite. The stock has been beaten down despite the fact nothing has really changed when it comes to fundamentals. The growth is still robust and we're yet to see any pricing pressure.

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