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In this article, we shall discuss the 11 best content delivery network stocks to buy now. To skip our detailed analysis of the global economic outlook and the content delivery network sector, go directly and see 5 Best Content Delivery Network Stocks To Buy Now.
Content delivery network (CDN) stocks offer a worthwhile investment opportunity to investors. A CDN is a geographically distributed network of proxy servers and their respective data centers. CDNs sprung up in the late 1990s as means to optimize traffic flow and enhance the distribution of content through bottlenecks on the Internet.
The CDN market is a branch of the wider global consumer electronics market. According to a recent market analysis report, the global CDN market growth is expected to accelerate at a CAGR of 26.84% from 2022 to 2026. The size of the CDN market is expected to achieve incremental growth by nearly $51.3 billion. The market is highly diverse and fragmented with multiple players occupying the competitive landscape. The fact that the CDN market is expected to grow 24.57% in 2022 whilst the global economic growth rate has plummeted to 2.2% makes CDN stocks a highly safe and profitable bet for investors who are reeling from losses brought about by the severe economic crisis.
The growth of the CDN market can be attributed to the recent rise in server availability post the 2020 pandemic. CDNs are able to utilize servers and distribute content accordingly, thereby networking traffic to these servers. CDN solutions have taken firm footing during the pandemic, with multiple organizations using CDNs to increase their digital footprint, and boost traffic on their websites. Content delivery clouds aid in enhancing the delivery service abilities of web applications and facilitate research which improves scalability, robustness of systems, etc. Some of the major players in the CDN sector include Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), and Amazon.com Inc. (NASDAQ:AMZN). In this article, we shall look at 11 best content delivery network stocks to buy now.
Photo by Taylor Vick on Unsplash Our Methodology
For this article, we looked at Insider Monkey's database which tracks 895 elite hedge funds and identified some of the best CDN stocks. Then, we picked 11 stocks with strong fundamentals, positive analyst ratings, or a favorable hedge fund sentiment.
The stocks have been ranked based on the number of hedge funds which hold stakes in them, from lowest to highest.
Best Content Delivery Network Stocks To Buy Now
11. Edgio Inc. (NASDAQ:EGIO)
Number of Hedge Fund Holdings: 15
Based in Tempe, Arizona, Edgio Inc. (NASDAQ:EGIO) is an American company which provides a content delivery network service which is used to distribute digital media content and software. The Edgio Platform provides services like video packaging, content management, web acceleration, cloud security, and cloud storage. In the second quarter of 2022, Edgio Inc. (NASDAQ:EGIO) posted an EPS of $0.07, beating estimates of -$0.03 by $0.10. Moreover, Q2 2022 saw the company generate revenues of $74.3 million against consensus $63.5 million.
In the past year, the company has successfully concluded two major acquisitions, upheaved and changed multiple aspects of their operating model, substantially contained significant costs, and implemented a growth-oriented team. The Edgecast acquisition was one of the best negotiated CDN deals ever, with Edgio Inc. (NASDAQ:EGIO) nearly doubling its revenue for $185 million, also accumulating an additional $65 million of free cash to go along. The stock has generated a year-over-year quarterly growth of 53.8% with adjusted earnings expected to reach $0.019 per share for fiscal year 2022. The current acquisition of Edgecast has eliminated much of Edgio's (NASDAQ:EGIO) competition, which will aid in cushioning the stock in the case of a recession. Revenues are expected to increase by 18.1% in 2022. The company is currently in the 59th percentile of companies in the IT Services and Consulting industry.
10. Rackspace Technology Inc. (NASDAQ:RXT)
Number of Hedge Fund Holdings: 16
Based in San Antonio, Texas, Rackspace Technology Inc. (NASDAQ:RXT) is an American cloud computing enterprise. It is one of the largest managed cloud providers, offering services to platforms like Amazon Web Services, OpenStack and Netflix. In the second quarter of 2022, Rackspace (NASDAQ:RXT) beat EPS estimates by $0.01, posting an EPS of $0.17 against consensus $0.16. The company has managed to maintain hedge fund sentiment in Q2 2022, with 16 hedge funds long the stock in both, Q1 and Q2 of 2022. Israel Englander's Millennium Management is the largest shareholder in Rackspace Technology Inc. (NASDAQ:RXT) as of Q2 2022, having a stake of more than $5.13 million.
The company's revenue profile seems extremely promising, as it maintains a solid recurring revenue stream and continually attains robust free cash flow. Management expects 1.5% year-over-year top line growth for the rest of 2022. Furthermore, Rackspace (NASDAQ:RXT) has managed to accumulate more than $3 billion in Annual Recurring Revenue, which should help to cushion the company from the headwinds of the global economic slowdown. There has been a strong increase in demand and the company is all set to capitalize on secular cloud computing growth trends. Although there is certain risk involved with regards to the company having leverage on the higher end of the spectrum, it's growth outlook is extremely favorable, with Rackspace (NASDAQ:RXT) posting a total revenue of $772.2 million in Q2 2022 beating consensus $744.2 million. Like Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), and Amazon.com Inc. (NASDAQ:AMZN), Rackspace Technology Inc. (NASDAQ:RXT) is one of the best content delivery stocks to buy now.
9. Fastly Inc. (NYSE:FSLY)
Number of Hedge Fund Holdings: 22
Headquartered in San Francisco, California, Fastly Inc. (NYSE:FSLY) is an American cloud computing services provider. The company's CDN service is completely configurable, and enables users to change content swiftly, providing maximum control and flexibility to the user. It operates from key access points on the internet known as points-of-presence (POPs). Fastly Inc. (NYSE:FSLY) provides CDN services to popular websites and applications such as Reddit, Spotify, Amazon, CNN and the BBC, among others. As of Q2 2022, D.E Shaw is the largest stakeholder in Fastly Inc. (NYSE:FSLY), owning more than 2.84 million shares worth $32.93 million.
On August 12, Raymond James analyst Frank Louthan lowered the price target on Fastly Inc. (NYSE:FSLY) to $25 from $35, keeping a Strong Buy rating on the shares. According to the analyst, the company has posted extremely promising Q2 2022 results, with Fastly's (NYSE:FSLY) near-term revenue growth beating guidance conclusively. He contends that the slight rise in the company's full-year guidance along with the recent announcement of a CEO transition will make Fastly Inc. (NYSE:FSLY) one of the best entertainment stocks to buy now.
8. Akamai Technologies Inc. (NASDAQ:AKAM)
Number of Hedge Fund Holdings: 27
Based out of Cambridge, Massachusetts, Akamai Technologies Inc. (NASDAQ:AKAM) is an American company which specializes in content delivery networks, cybersecurity, and cloud computing services. On August 10, Truist analyst Greg Miller lowered the price target on Akamai Technologies Inc. (NASDAQ:AKAM) to $125 from $135, maintaining a Buy rating on the shares. According to Miller, the company posted strong Q2 2022 returns, led by the company's CDN and security services. The company has recently made deals to acquire popular cloud computing companies Linode and Guardicore, which should help Akamai Technologies' (NASDAQ:AKAM) portfolio leverage the largely fixed cost structure of the global network. Like Verizon Communications Inc. (NYSE:VZ) , AT&T Inc. (NYSE:T), and Amazon.com Inc. (NASDAQ:AMZN), Akamai Technologies Inc. (NASDAQ:AKAM) is one of the most prominent content delivery network stocks to buy now.
The company posted favorable Q2 2022 results, with revenue totaling up to $903.7 million in Q2. Furthermore, Akamai (NASDAQ:AKAM) posted an earnings-per-share of $1.35, beating estimates of $1.31 by $0.04. Management has projected the company to achieve growth of 10.66% per annum for the next 5 years. Sales have risen considerably, achieving growth of more than 7% since 2021.
7. GoDaddy Inc. (NYSE:GDDY)
Number of Hedge Fund Holdings: 40
GoDaddy Inc. (NYSE:GDDY) is an American publicly traded company which specializes in Internet domain registration, web hosting, and content delivery networks, and is based out of Tempe, Arizona. The company is the world's largest web host by market share, with over 74 million registered domains. KeyCDN is GoDaddy's (NYSE:GDDY) premium content delivery network, which delivers digital content, including websites, software, or games, through a strategically designated network of edge servers, to provide faster online experiences. As of Q2 2022, the company posted an EPS of $0.56, beating estimates of $0.49 by $0.07. It currently has a market cap of $11.92 billion and posted a revenue of $1.02 billion in Q2 2022.
Despite strong competition from rival CDN providers like Amazon Web Services and Google Cloud, GoDaddy Inc. (NYSE:GDDY) is improving in profitability and is still one of the top web hosting firms in the world in an industry which is expanding at 16.7% CAGR.
Here is what Canterbury Tollgate had to say about GoDaddy Inc. (NYSE:GDDY) in their Q3 2021 investor letter:
“GoDaddy (NYSE:GDDY) in particular sold off after reporting quarterly earnings in early August. Yet they are still growing the top line by more than 10 percent per annum. Short term pain creates opportunity. Presently GDDY (NYSE:GDDY) trades at a greater than 5.5 percent trailing FCF yield, and a 7.2 percent 2021 yield based on my own (lower than consensus) estimation. Deferred revenue continues to improve. CEO Aman Bhutani and team have done an excellent job rebranding the company. I’m confident they will continue to address challenges along the way and keep GoDaddy (NYSE:GDDY) on the right path.”
6. Cloudflare Inc. (NYSE:NET)
Number of Hedge Fund Holdings: 41
Headquartered in San Francisco, California, Cloudflare Inc. (NYSE:NET) is an American content delivery network and DDoS mitigation company. More than 20% of all Internet users employ Cloudflare Inc. (NYSE:NET) for web security. In Q2 2022, Cloudflare Inc. (NYSE:NET) posted a total revenue of $234.5 million, an increase of 54% year-over-year.
Cloudflare Inc. (NYSE:NET) is well positioned to shield itself from the impending macroeconomic headwinds, with management projecting growth estimates of 200% in 2023 due to rising demand and substantial market expansion. The company's resilience was put on display when it achieved remarkable revenue growth in 2022 despite elongated sales cycles amongst larger customers. Security is the central revenue stream for Cloudflare Inc. (NYSE:NET), and with security budgets less likely to get cut in the event of a downturn, the company is more or less recession-proof. Furthermore, Cloudflare's (NYSE:NET) large customer base is increasing exponentially, representing nearly 59% of the total revenue in Q2 2022, compared to 46% in 2020.
Here is what Baron Funds had to say about Cloudflare Inc. (NYSE:NET) in their Q2 2022 investor letter:
“Despite posting solid quarterly results with 54% revenue growth, and a record addition of 14,000 customers, shares of Cloudflare, Inc. (NYSE:NET), a software infrastructure provider, declined 63% in the quarter along with other fast-growing names in the software universe that penalize current profitability by reinvesting back in their businesses. We believe Cloudflare’s (NYSE:NET) disruptive global platform and unmatched pace of innovation will enable the company to continue to take share across multiple large addressable markets for years to come.”
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Disclosure: none. 11 Best Content Delivery Network Stocks To Buy Now is originally published on Insider Monkey.
