Looking at Akamai Technologies, Inc. (NASDAQ:AKAM)´s financial strength, profitability and growth is pointless. Its economic health is an example to other companies. In MorningStar words, its balance sheet is rock-solid. Hence, the company´s future prospects depend more on savvy management and intelligent investment in order to minimize expected stronger competition. The investment is the easy part since the company has an impeccable financial record. However, given the size of the company´s to-be-competitors, maintaining a leading position will be a hard task. On the up-side, the company has received investment from important hedge funds, providing the necessary liquid solvency to complete the upgrades required to make rivals pay a higher entrance price.
So, as long as the demand for higher surf speeds increases –and demand is expected to rise steadily, Akamai Technologies, Inc. (NASDAQ:AKAM) will have a bigger pool from which to pull customers from while increasing revenues. The company has also placed its attention on the security aspect of the business, giving customers more tranquility about shared information. Opportunities also emerge from the mobile communications sector as the use of smartphones becomes common worldwide and their demand for internet navigation increases. Such phenomena will have a positive impact on Akamai´s demand and revenues. Overall, the company enjoys good financial health, and as demand is expected to grow, it is recommended to BUY in order to enjoy the benefits of a well-established growing company.
Nothing bothers a web-surfer more than advertising. It seems to be everywhere, leaving evidence of the ever-increasing business demand that surrounds ValueClick Inc (NASDAQ:VCLK). Not all is bright and shiny for the advertisement company, however, and analysts have sure taken notice of the company´s foggy horizon by recommending a hold.
According to Zacks, ValueClick is expected to be negatively impacted in its top-line growth and profitability by an unfavorable foreign exchange, sluggish European and US market growth, and stiff competition. In addition to all that, the service that the company provides has been progressively absorbed by its own customers. Such behavior should not be a surprise to anyone since the company licenses its platform to clients. In other words, ValueClick Inc (NASDAQ:VCLK) is confronting a significant amount of competition and is losing ground and this is reflected by its stock price decline.
Not all is bad news for ValueClick. The company has shown itself to be a leader among peers, and it has made some very intelligent and financially-successful acquisitions. At the same time, using the web as an advertisement tool has become ever more common, meaning that ValueClick Inc (NASDAQ:VCLK)´s customers can only multiply in number with demand for a more effective service. Also, financial health gives the company a sound sleep since it possesses a mattress on which to fall if its business takes the wrong turn. As a matter of fact, given the company’s cash-to-debt ratio, it is fair to say that the mattress is currently under use. In this case it is recommended to SELL as returns are not expected in the short or long term.
Bottom line
Internet based companies have come a long way since March, 2000, and many have learned to provide a remunerated service. ValueClick Inc (NASDAQ:VCLK), Akamai Technologies, Inc. (NASDAQ:AKAM), and LinkedIn Corp (NYSE:LNKD) are three examples with different results. The first has entered an honest decadence, while the second was able to make a turn around. LinkedIn entered the game having learned from others misfortune and presents today the best prospects for profitable returns, while facing less competition and continually rising competitor´s market entrance price.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn.
The article Is Investing in Internet-Related Companies a Good Bet? originally appeared on Fool.com.
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