$AKAM reports ER after the bell today. The call is at 4:30pm EST. 

Consensus is: EPS of $0.63 (versus $0.70 last year) on revenue of $568.8 mln (+6% YoY). The current consensus is within the company's guidance range of $0.60-0.64 & revenue of $557-577 mln. The company is expected to guide for the first quarter where Capital IQ consensus stands at $0.62 & revenue of $567.9 mln.

The company has said it expects a decline in revenue in Q4 and three of largest US media accounts. With FB showing that ad sales are through the roof this leads me to believe there is a bigger issue here with the management or with the positioning they've taken for the future benefit of the company.

The company said the revenue decline was driven primarily by slowing traffic growth and a very strong Q4 2014.

Again, not sure how that was possible with a growth in web traffic. It seems they may need to look forward yet again.

Metrics:

The first area of interest will be various metrics. Taking a look at last quarter, the company reported adjusted EBITDA of $222 mln, which grew 4% over Q3. Adjusted EBITDA margin was 40%, down 3 percentage points YoY. Looking ahead to the fourth quarter, the company expects adjusted EBITDA margins of 40-41%. Looking beyond Q4, the company will strive to operate the company in the 40% to 41% EBITDA range for the foreseeable future. 

Taking a look at last quarter, the GAAP gross margin was 67% which was in line with the prior quarter and down 1 percentage point from the same period last year. Looking ahead to the fourth quarter, the company expects GAAP gross margins to come in around 66%. DA Davidson expects 44% of rev from the Media Delivery group, 48% from the Performance and Security group, and the remaining 8% from the Service and Support group. The firm also expects gross margins of 66%, operating margin of 27.9%, and EPS of $0.60, which compares to $0.70 in the year-ago quarter. Q4 is typically a strong seasonal quarter, with online retail activity through the holiday season providing a tailwind to growth.

Options Activity

  • Based on AKAM options, the current implied volatility stands at ~ 75%, which is 64% higher than historical volatility (over the past 30 days). Based on the AKAM Weekly Feb12 $40 straddle, the options market is currently pricing in a move of ~12% in either direction by weekly expiration (Friday).

Technical

  • AKAM shares have underperformed the Nasdaq so far this year with AKAM falling by 22% vs 14% decline in the index. 

Look for resistance near $44.00 & $45.60-46

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