In this article, we shall discuss the 11 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.”
5. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holdings: 58
Based in New York City, Verizon Communications (NYSE:VZ) is an American multinational telecommunications conglomerate. Verizon Web Acceleration is the company’s network-agnostic CDN service which optimizes web and mobile app experience, while protecting servers, ensuring reliability and maintaining scale. It utilizes its advanced caching and acceleration strategies to enhance web content distribution for its clientele and has branches in e-commerce, online banking, software, social media feeds, and video streaming.
On October 6, Oppenheimer analyst Timothy Horan upgraded the rating on Verizon Communications (NYSE:VZ) shares to Outperform from Perform, and conferred a $50 price target. According to the analyst, although the near-term trends seem volatile, the company is well-positioned to achieve gradual-stabilization-to-growth of the subscriber base. Horan expects a stronger free cash flow of more than 15% per year for the company, as it passes peak investment and leverage.
Here is what Diamond Hill Capital Management had to say about Verizon Communications (NYSE:VZ) in their Q2 2022 investor letter:
“Verizon Communications Inc. (NYSE:VZ), alongside other wireless providers, has been increasing plan prices to help offset inflation effects. We’ve also seen indications that the wireless industry is moving away from the aggressive promotional environment of the last 18 months. A lower level of industry promotional intensity should benefit Verizon’s (NYSE:VZ) share of quarterly net adds while allowing the company to continue to focus on migrating customers to higher priced unlimited plans.”
4. Netflix Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holdings: 95
Headquartered in Los Gatos, California, Netflix Inc. (NASDAQ:NFLX) is an American subscription streaming service, production company, and in-house CDN service. It is the second largest entertainment company in the world by total market capitalization. Although the company lost more than 950,000 subscribers in Q2 2022, analysts are confident about the stock’s fundamentals and long-term projections, citing the current losses to temporary headwinds and overall loss of purchasing power.
On September 28, Atlantic Equities analyst Hamilton Faber upgraded Netflix Inc. (NASDAQ:NFLX) to Overweight from Neutral, and raised the price target to $283 from $211. The analyst has favorable expectations from the company’s upcoming ad-supported service launch, considering it crucial and noting that its benefits has not yet been reflected in the consensus estimates for Netflix Inc. (NASDAQ:NFLX).
Here is what IP Capital Partners had to say about Netflix Inc. (NASDAQ:NFLX) in their Q2 2022 investor letter:
“Netflix was the top performance detractor for the year. After a brutal growth acceleration throughout 2020, followed by an expected moderation throughout 2021, 2022 was an important year to define whether the company would be able to maintain an extremely consistent historical growth trend until then.
Among the 37 million subscribers added in 2020 – boosted by the lockdown – and the 18 million added in 2021, the company added an average of 27 million subscribers in the last two years, a number practically equal to the 29 and 28 million subscribers that Netflix added, respectively, in 2018 and 2019.
Considering, also, that the 8.3 million subscribers added in the last quarter of 2021 were equivalent to the equivalent quarters of the previous three years [ 2 ] , it seemed reasonable to us to assume that the anticipation of demand caused by the pandemic in 2020 had reversed throughout 2021, bringing together the conditions for a more normalized growth in 2022.” (Click here to see the full text)
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holdings: 153
Based out of Mountain View, California, Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company. Its primary subsidiary, Google, focuses on search engine technology, online advertising, cloud computing, e-commerce, artificial intelligence, and content delivery networks. Google Cloud CDN is the company’s CDN service which facilitates clients in distributing content which is hosted on-premises or in another cloud, using Google’s global edge network. It accelerates the customer’s websites and applications and offers global server coverage. In Q2 2022, the company posted a total revenue of more than $69.69 billion.
On October 4, BofA analyst Justin Post lowered the price target on Alphabet Inc. (NASDAQ:GOOG) to $114 from $125, maintaining a Buy rating on the shares. The analyst lowered the price target due to the potential top-down impact of a GDP recession in the Western economy, as well as potential headwinds from the monetization of TikTok. However, the stock’s strong free cash flow, coupled with a favorable earnings yield over time, makes it one of the best content delivery network stocks to buy now. The analyst sees potential in the strong resilience with regards to the EPS, which will further be complimented by cost-cutting in 2023.
Here is what Lakehouse Capital had to say about Alphabet Inc. (NASDAQ:GOOG) in their Q2 2022 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) reported another strong quarterly result despite the tough macroeconomic conditions. Revenue increased by 13% as Search proved resilient, primarily led by strength in the travel and retail verticals. YouTube advertising growth was lighter and moderated due to a tough comparison period and a general softening in brand advertising spend. That said, YouTube’s user engagement and time spent still continues to grow which bodes well for future monetization opportunities. Google Cloud outpaced the company’s overall growth with revenue increasing by 36% and while it has yet to show any signs of profitability, we remain supportive of Alphabet continuing to reinvest in its cloud business given the size of the market opportunity ahead. On the cost front, the company added another 10,000 employees during the quarter, but notably, the CFO mentioned that hiring will likely slow down over the next twelve months as the company focuses on greater operating efficiency. Overall, we’re pleased with how the company has performed and are confident that management will be able to control costs, if or when the economic environment becomes more challenging.”
2. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holdings: 252
Based in Seattle, Washington, Amazon (NASDAQ:AMZN) is an American multinational technology company which specializes in e-commerce, cloud computing, digital streaming and AI. Its subsidiary, Amazon Web Services provides on-demand cloud computing platforms and APIs to individual, corporate, and state buyers. Amazon CloudFront is the company’s premium CDN service operated by AWS, and it speeds up the distribution of one’s static and dynamic web content. As of October 7, the company has a total market cap of more than $1.16 trillion. In Q2 2022, Amazon (NASDAQ:AMZN) posted a total revenue of $121.2 billion.
On October 4, BofA analyst Justin Post lowered the price target on Amazon (NASDAQ:AMZN) to $157 from $170, maintaining a Buy rating on the shares. While the analyst thinks that sales ex-forex are generally on track to hit Q3 guidance ranges after a profitable Q2, he has lowered the forward estimates for the stock to reflect the macroeconomic uncertainties and the appreciation of the U.S. dollar. J.P. Morgan has also offered a bullish take on the stock on October 4, considerably boosting the price target on the shares up. The bank’s analyst explained that despite macroeconomic headwinds, Amazon (NASDAQ:AMZN) is well positioned to outperform in the tough economic environment. The company is expected to return to mid-single margins as lower freight and fuel costs relative to the first half of 2022 offer tailwinds. The bank expects YoY revenue growth, margin expansion, and capex moderation to boost FCF inflection in 2023.
Here is what IP Capital Partners had to say about Amazon (NASDAQ:AMZN) in their Q2 2022 investor letter:
“Although it seems like a baseless question, the teasing in a joking tone makes sense. What Amazon has been doing since its inception is building two big infrastructure rails. One from the world of atoms and the other from bits. In the first, it has been building one of the largest logistics systems in the world, with almost 1,200 distribution centers , responsible for delivering, in less than 2 days, millions of products to the final consumer. In the second, it has a leading cloud computing service, allowing companies of all sizes to scale computing and data storage, without having to build and maintain their own in-house IT equipment.
Despite showing strong revenue growth since the beginning of the pandemic, these two infrastructures have had different realities in terms of operating results. The e-commerce operation has been going through a period of low profitability, despite the enormous advantage of scale and competitive dominance, with more than 40% of market share in the US. In turn, the cloud business – AWS – continues to grow at high rates and is already at a cruising pace in terms of operating margin and return on invested capital (both around 30%)…” (Click here to see the full text)
1. Microsoft Corp. (NASDAQ:MSFT)
Number of Hedge Fund Holdings: 258
Based in Redmond, Washington, Microsoft Corp. (NASDAQ:MSFT) is an American multinational technology corporation which specializes in computer software, consumer electronics, personal computers, and other related services. Microsoft Azure is a cloud computing service operated by Microsoft Corp. (NASDAQ:MSFT) for application management via company-operated data centers. Azure CDN enables developers to distribute high-bandwidth content to users swiftly, by caching their content at strategically placed physical nodes across the globe.
On October 4, Oppenheimer analyst Timothy Horan lowered the price target on Microsoft Corp. (NASDAQ:MSFT) to $275 from $300, keeping an Outperform rating on the shares. The analyst contends that since a significant portion of the company’s revenue stream is defendant on Productivity Software and Cloud Computing, the company is relatively more immune to impending economic headwinds than other players in the sector. Microsoft’s (NASDAQ:MSFT) current valuation has moderated itself to pre-pandemic levels, making it an excellent investment opportunity for the right investor. Moreover, the analyst contends that the expansion of Microsoft Azure will boost the profitability of the stock, with contractual revenues shielding the stock from macroeconomic headwinds and driving upside potential. As share price multiples plummet to nearly 40% from highs, the price target is set to rise to more than $300 over the next quarter.
Here is what Diamond Hill Capital Management had to say about Microsoft Corp. (NASDAQ:MSFT) in their Q2 2022 investor letter:
“The recent market environment has enabled us to initiate positions in some high-quality names that have sold off indiscriminately and are trading at prices we haven’t seen in quite some time. Microsoft Corporation (NASDAQ:MSFT) is one example. Microsoft’s stock price declined amid the broader selloff of technology companies. This presented an opportunity for us to purchase shares at an attractive discount to our estimate of the intrinsic value. We expect the business to continue generating strong revenue growth and benefiting from operating leverage. Microsoft’s cloud computing services business, Azure, is also generating robust growth, confirming its competitive positioning.”
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Disclosure: none. 11 Best Content Delivery Network Stocks To Buy Now is originally published on Insider Monkey.
