Akamai vs Fastly Stock: Which Is Best?

Akamai Technologies, Inc. (NASDAQ:AKAM) is a foundational part of the internet, providing content delivery and cybersecurity services that keep the web safe.

Fastly Inc (NYSE:FSLY) is a competing platform that has partnerships with companies like Shopify, A&E, Stripe, and The New York Times.

These cloud-based software-as-a-service (SaaS) companies grew to all-time high market capitalizations in the aftermath of the global pandemic. Analysts believe technology stocks could be a safe bet as the world moves forward with virtual work.

But which is the better buy between Akamai vs Fastly stock?

Each services a large portion of web traffic and creates a safe browsing environment. Without them, hackers can exploit your website’s coding and exploit visitors’ computers. It’s because of these services that we have a trust-based internet.

However, technology is continuing to evolve, and hardware like quantum computers will soon be deployed to unlock most modern encryption techniques. This means each could find itself in a position where it needs to pivot or even sell.

So how will these companies fare over the coming decade, starting with Akamai.

Akamai Won When The World Went Virtual

Akamai stock crashed twice in 2020 – once in March with the coronavirus crash that plagued the entire market and again at the end of October.

Its content delivery network (CDN) became pivotal during the push to work home because it’s essentially a distributed network of servers.

By cutting the physical distance between your computer and the Internet server, speeds are greatly increased. It also makes the internet more secure by placing third-party hall monitors in the connection.

More internet usage means more need for CDNs, which gave the company a boost through most of 2020. However, the buzz quieted by its third-quarter earnings reports, despite the company beating expectations with $793 million in revenue reported.

This is a 12 percent increase from the same quarter in the prior year, but investor interest was tepid, causing the company to get overlooked.

It’s starting a recover in November, and the holiday season could be a great buy to prepare your portfolio for what’s sure to be a turbulent 2021.

Its $15 billion market cap is right around where it was valued before the pandemic, and its P/E ratio of 28x makes it a good look for investors at a $100 price point. But can it outperform Fastly?

Fastly Revenues Are Much Smaller, But…

Like Akamai, Fastly received a big boost in the aftermath of the coronavirus outbreak.

Unlike Akamai, it’s a less-established public company, so it didn’t have much room to crash with the market. Instead, it rose from a 52-week low of $10.63 to a high of $136.50, before settling in the $70 range by November.

It also crashed at the end of October, as investors soured on the entire CDN industry.

One of the biggest issues it faced was the U.S. government putting TikTok in the crosshairs of its trade war with China.

This popular software service is one of Fastly’s largest customers, and its success hinges on the ability to continue serving it to American users.

Beyond those issues gaining headlines that dropped the market capitalization, Fastly earned $71 million in revenue, losing $4 million net to operating expenses. This drop was attributed directly to TikTok.

Still, it represents revenue growth, and the company has a functional network that’s essential in the upcoming environment.

The Internet of Things (IoT) and artificial intelligence (AI) are growing alongside mixed reality (MR) and higher-definition audio and video streaming content. It adds up to a necessity for CDNs that’s not going away and means Fastly could be a great value buy for the long term.

Akamai Stock Price Depends On Future Client Upsells

The biggest risk Akamai faces is in competition, not only from newcomers like Fastly but also from major tech enterprises like Amazon (AMZN), IBM (IBM), and Cloudflare (NET).

Cloud-based services are a profitable market, but it’s highly competitive. As the market grows, rivalries will heat up, and some companies will pull as much of their CDN needs in-house as possible. It needs to continue innovating in other services to upsell to its existing client base while building on it.

It’s not going to be easy, and it’s already struggling to maintain a higher market cap. At its core, Akami is more of a back-end utility company than a consumer-facing brand that runs Super Bowl commercials with celebrities or sponsors music festivals.

It needs to depend on a strong business-to-business (B2B) salesforce to stay afloat. And it’ll be competing for that pool of talent with rivals like Fastly (FAST).

TikTok Loss A Blow To Fastly

Fastly may have lost TikTok, but with Trump being replaced by Biden, relations with China could improve. Reinstating TikTok would be a big boost to Fastly’s business, but its initial ban showed the company’s weakness.

Its value is over seven times what it was at start of the year, and it has a much larger war chest to play with. But that’s small potatoes to a company like IBM (IBM), Google (GOOG), or Microsoft (MSFT), who could easily buy the company out.

It needs to pull bigger contracts with more clients to deliver a crystal-clear data streaming experience. This company’s next four years will be similar to Pied Piper, the fictional company featured in HBO’s Silicon Valley series.

Fastly Vs Akamai Stock: The Bottom Line

Fastly and Akamai became the belles of the ball in the wake of the coronavirus pandemic. Users rushed to the internet, which is filled with data-heavy games, videos, and other streams that hog bandwidth. Speed is the key to victory, and these CDNs keep everything from your homeschool to work and play running smoothly and lag free.

As companies continue relying on connected technology, both companies are likely to become essential. They’re also well priced at the end of 2020, due to tepid investor interest. This represents an opportunity for bullish investors to get in cheap, so long as you know which one fits into your portfolio.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.