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Is Amazon Poised to Eat Akamai’s Lunch?

Monday, 9 Jan 2012 | 4:11 PM ET

Akamai, facing increased competition from the likes of Amazon, was downgraded to “sell” from “neutral” by one “Fast Money” analyst.

Citigroup analyst Mark Mahaney noted that he had been bullish on the company in the past.

“One thing that’s new, though, however, is the competitive landscape has changed,” he said Monday. “And Amazon, particularly, is making a much bigger move against this company.”

Mahaney said that the end market has experienced year-over-year growth upward of 30 percent.

Netflix in 2012
Netflix is now the best performing stock in the S&P so far this year. Insight on the stock's move and where to trade from here, with Whitney Tilson, T2 Partners managing partner, and other stocks worth watching today, with Mike Mahaney, Citigroup, who shares which ones to buy, hold and sell.

“But Akamai hasn’t been growing anywhere close to that for two years,” he said. “It makes you wonder why, and I think it’s because of competitive pressure.”

At the same time Amazon has been rolling out more services that are set to compete with Akamai.

“I’m watching that Amazon train coming in,” he said. “That’s what an Akamai investor should be most cautious about.”

Akamai shares closed down half a percent midday at $32.61. Mahaney had a price target of $27 per share. Amazon closed down 2.2 percent at $178.56.

Josh Brown of Fusion Analytics sounded bullish on the sector but wary of Akamai.

“There’s some question as to why isn’t growing or seeing the same margin growth that it used to,” he said. “That’s the kind of thing you just say, Look, maybe it’s cheap, but I don’t know enough and clearly there’s too big of a question mark surrounding it.”

IPO Questions

“Fast Money” host Scott Wapner asked Mahaney about a Wall Street Journal article that implied a link between his status as an widely followed Internet analyst and IPOs backed by Citigroup.

“My record on picking stocks, whether they’re IPOs , whether they’re banking clients or not, is pretty clear. We’ve done all sorts of things with those stocks. Even with banking clients, we’ve gone out with buys, sells, holds. The record’s clear. No particular comment,” Mahaney said. “Clients that are long Akamai aren’t particularly happy with my call today, but that’s part of the business.”


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Trader disclosure: On Jan. 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Najarian is long AAPL stock and calls; Najarian is long C; Najarian is long JPM calls; Najarian is long WFC calls; Najarian is long MSFT; Najarian is long INTC; Najarian is long YHOO; Najarian is long BMY calls

For Whitney Tilson
Tilson is long NFLX

Tilson is short CRM

For Josh Brown
Fusion Analytics is long AAPL

Fusion Analytics is long COP

Fusion Analytics is long JPM

Fusion Analytics is long LULU

For Brian Kelly
Shelter Harbor Capital is long

Shelter Harbor Capital is long TSM

Shelter Harbor Capital is long KRE

Shelter Harbor Capital is long IWM

Shelter Harbor Capital is long XHB

Shelter Harbor Capital is long GLD

Shelter Harbor Capital is long SLV

Shelter Harbor Capital is long short

Shelter Harbor Capital is short Dax

Shelter Harbor Capital is short Eurostoxx

Shelter Harbor Capital is short CS

Shelter Harbor Capital is short UBS

For Shaw Wu
Sterne Agee makes a market in AAPL shares

For Jeff Kilburg
Kilburg is long Long 10 yr

Kilburg is long 30 yr

Kilburg is long TLT

For Abigail Doolittle
* No disclosures

For Mark Mahaney
Gregory Hertz, CFA, CPA, Associate, holds a long position in the securities of AOL, Inc.

Patrick Feeley, CPA, CFA, Associate, holds a long position in the securities of WebMD Corp.

William Reinhardt, CFA, Associate, holds a long position in the securities of Google Inc.

Steven J Fullerton, Associate, holds a long position in the securities of Google Inc.

Neil A Doshi, Associate, holds a long position in the securities of Google Inc.

Rohit Thapliyal, Associate, holds a derivative position in the securities of Amazon.com Inc.

Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Akamai Technologies Inc, Ancestry.com, eBay Inc, Netflix Inc, Yahoo! Inc. This position reflects information available as of the prior business day.

Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Ancestry.com, Google Inc, Groupon, Inc., WebMD Corp, Active Network Inc, Bankrate Inc.

Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Orbitz Worldwide Inc, eBay Inc, Google Inc, Groupon, Inc., WebMD Corp, Active Network Inc, Bankrate Inc.

Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Yahoo! Inc.

Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Tree.com, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc, Bankrate Inc in the past 12 months.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Bankrate Inc, Ancestry.com, Active Network Inc, Groupon, Inc., Orbitz Worldwide Inc, eBay Inc, Google Inc, WebMD Corp, Yahoo! Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Tree.com, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Vistaprint NV, WebMD Corp, Yahoo! Inc, Bankrate Inc.

Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Bankrate Inc, Ancestry.com, Active Network Inc, Groupon, Inc..

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.

The Firm is a market maker in the publicly traded equity securities of Monster Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, Ancestry.com, Blue Nile Inc, eBay Inc, Google Inc, Groupon, Inc., HomeAway, Inc., IAC/InterActiveCorp, Netflix Inc, OpenTable, Inc, Priceline.Com Inc, ReachLocal Inc, Tree.com, ValueClick Inc, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc, Bankrate Inc.

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