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The
summer of 2013 is expected to be anything but dull. Tensions among
investors
and market volatility are high as we weigh the effects of QE tapering
amidst a
world with struggling economies.
Stocks
that have global discretionary exposure or unjustifiably high
valuations have
gotten hit the hardest over the last month or so.
If
economies do weaken and consumers slow their spending habits once
again, there
are a few areas that could still see strong growth. In fact,
today’s bull of the day might
actually benefit from consumers staying home, surfing the web or
engaging in
more online content.
Think
about them as a quasi-defensive growth company; sure they have
competition, but
they are one of the best at what they do and it seems that investors
may be
gearing up for the company to make another leg higher as short interest
dropped
dramatically as of late.
The
most recent short interest data has been released by the Nasdaq for the
05/31/2013
settlement date, showed a 6,608,451 share decrease in total short
interest from 10,971,242 or 37.59% since 05/15/2013. This
shift happened even as the stock price
skyrocketed.
Who are they?
Akamai AKAM
is more than just a “cloud” company; the company provides the
leading cloud
platform for helping enterprises provide secure, high-performing user
experiences
on any device, anywhere. The
proliferation of mobile devices from the likes of Apple AAPL,
Samsung, HTC, Google
GOOG and
more all will add to the need for Akamai’s services.
If
you’ve ever shopped online, downloaded music, watched a web video or
connected
to work remotely, you’ve probably used Akamai’s cloud platform. The
company’s
promise is to ensure the best online experience on any device, anywhere.
Akamai delivers
roughly 20% of ALL web
traffic globally.
Akamai
helps enterprises accelerate innovation in the hyper-connected world by
removing the complexities of technology and handling all the “leg work”
in
getting content from the company to the consumer and beyond.
Their
“Intelligent Platform” reaches globally and delivers locally, providing
customers
with unmatched reliability, security and visibility into their online
business. This platform comprises more than 95,000
servers located across nearly 1,000 networks in 70 countries worldwide
and delivers
hundreds of billions of internet interactions daily.
The
company also tracks and defends against “attack traffic” on the
internet, helping
us all get the safest bandwidth possible. Global
internet traffic is not only growing
in raw content and users, but the speed at which we access that content
is also
rising rapidly.
Recent Results
Most
Zack’s Rank #1 stocks have recently experience very positive analyst
momentum
and Akamai is no exception.
After
the company delivered a 24% beat last quarter (42cents versus the Zacks
Consensus for 34 cents), there have been a slew of positive analyst
revisions. The Zacks Consensus for the
current and next quarters as well as FY2013 and FY 2014 are all higher
than
they were just 2 months ago, with none moving their estimates lower.
Akamai
is expected to report Q2 results on July 24th and given their Zacks
Rank coupled with an earnings ESP of 8.11% in the current quarter,
there is a
very good chance they will beat the current Zacks Consensus for 37
cents. ESPs are also positive for the future, which
is a good sign for guidance.
AKAM
has beat the Zacks Consensus earnings estimates 4 periods in a row,
exceeding expectations
by an average of 13.7%.
The
Charts
Since gapping almost 17% above the 200 day
moving average on their last earnings report, the stock added another
15%, making
a new 52 week high of 48.47 over the last month.
Recently, shares have
come down to their post
gap price around the $42.50 level, which is just above the 50 day
moving average
of $42.34.
Shares are in an odd
area here; I’d like to
see them trading above the $43.07 area, which coincides with a key
Fibonacci
level. If the stock breaks down here along
with the broad market, look for strong support around $39.50 and even
more at
the 200 day moving average of $37.81.
The reality is that
the intermediate bullish
trend is intact, and a buy around these levels wouldn’t be
catastrophic, but
Akamai’s forward P/E of 26.5 may put it on the temporary chopping block
if the
broad market corrects.
Look for an initial
upside target of $47.25,
with another 5% breakout if shares eclipse the 52 week high.
Akamai
is my favorite pick in the cloud space at the moment; Rackspace RAX, a
Zacks
Rank #5 Strong Sell, doesn’t look nearly as attractive and trades at
double the
multiple and while Hewlett
Packard HPQ (Zacks
Rank #3 Hold) is trying to move
into the space, they may have a long road ahead and are much less agile
and “plugged
in” than Akamai.
Jared
A Levy is one of the most highly sought after traders in the world and
a former
member of three major stock exchanges. That is why you will frequently
see him
appear on Fox Business, CNBC and Bloomberg providing his timely
insights to
other investors. He has written and published two tomes, “Your
Options Handbook” and “The
Bloomberg Visual Guide
to Options”.
You can discover more of his insights and recommendations through his
two
portfolio recommendation services:
Zacks Whisper
Trader– Learn to
buy stocks likely to have robust earnings BEFORE they report.
Zacks TAZR Trader
– Technical Analysis +
Zacks Rank. Best of both worlds approach to find timely trades.
Follow
Jared A Levy on twitter at @jaredalevy
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