Software companies Fastly (FSLY) and Akamai (AKAM) both saw their stocks rise on Monday after competitor Edgio (EGIOQ) filed for bankruptcy. This is creating opportunities in the shrinking content delivery network (CDN) market. Indeed, Fastly was upgraded from Hold to Buy by five-star Oppenheimer analyst Timothy Horan, who assigned a $12 price target, as the firm is expected to gain $40M in revenue from former Edgio contracts. As a result, its shares jumped nearly 20% at the time of writing as it looks to recover from a tough year.
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Fastly is seeing strong demand for its edge computing and security products due to the rise of AI applications. The CDN market has consolidated from six major players to three in just over a year, and Fastly is positioned as the premium provider. In fact, Oppenheimer pointed out that it has a growing edge in the industry, with CDN still making up 75% of its revenue.
Akamai is also benefiting from Edgio’s collapse, as it acquired about $100M in Edgio contracts for $150M. This deal is expected to generate high margins and pay off in just two years. On top of this, Akamai’s cloud and edge computing platforms are positioned to grow with increasing demand for AI and cybersecurity services as it integrates and phases out Edgio’s infrastructure. As a result, Oppenheimer upgraded its rating to Outperform and set a $120 price target. It’s worth noting that, so far, Horan has enjoyed a 64% success rate on his stock ratings, with an average return of 9.8% per rating.
Which Software Stock Is the Better Buy?
Overall, out of the two stocks mentioned above, analysts think that AKAM stock has more room to run than FSLY. In fact, AKAM’s price target of $113.91 per share implies almost 17% upside versus FSLY’s nearly 16% downside risk.
