NEW YORK (AP) - Shares of Akamai Technologies Inc. bounced back Wednesday, a day after dropping on worries about the effect of customer Netflix Inc. replacing use of Akamai's content delivery technology with a network of its own. A B. Riley analyst advised investors to buy shares after the decline.
THE SPARK: B. Riley & Co. analyst Sameet Sinha said Netflix makes up a tiny percentage of Akamai's business and other companies won't be as quick to embrace the idea of creating their own delivery network.
He backed his "Buy" rating and $36 price target for Akamai.
THE BIG PICTURE: Akamai helps websites deliver video and other content to viewers.
Netflix said on its official blog Monday that it plans to expand Open Connect, its content delivery network, eventually replacing outside providers such as Akamai, making its own system the way customers get most of their streaming Netflix video.
Shares of Akamai, as well as similar companies, fell on the news. Akamai shares lost as much as 9 percent Tuesday, before recovering somewhat to close down 92 cents, or 3.2 percent, at $27.44.
THE ANALYSIS: Sinha noted that Netflix only accounted for about $4 million to $5 million, or less than half a percent, of Akamai's revenue last year.
And he said that it's unlikely many other companies that account for more of Akamai's business will follow Netflix's lead and create their own networks too, noting that it only makes financial sense for the biggest companies. Only Google Inc. and Yahoo Inc. run all of their traffic through internal content delivery networks, he said.
He expects years of double-digit growth from Akamai, which is benefiting from increasing demand for its technology involved in digital video, e-commerce, online ads and mobile, among other trends.
THE SHARES: Up $1.43, or 5.2 percent, at $28.87. Shares had lost about 16 percent over the past 12 months and were down 23 percent in the past three months.
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