Stocksthat have global discretionary exposure or unjustifiably highvaluations havegotten hit the hardest over the last month or so.
Ifeconomies do weaken and consumers slow their spending habits onceagain, thereare a few areas that could still see strong growth. In fact,today’s bull of the day mightactually benefit from consumers staying home, surfing the web orengaging inmore online content.
Thinkabout them as a quasi-defensive growth company; sure they havecompetition, butthey are one of the best at what they do and it seems that investorsmay begearing up for the company to make another leg higher as short interestdroppeddramatically as of late.
Themost recent short interest data has been released by the Nasdaq for the05/31/2013settlement date, showed a 6,608,451 share decrease in total shortinterest from 10,971,242 or 37.59% since 05/15/2013. Thisshift happened even as the stock priceskyrocketed.
Who are they?
Akamai AKAMis more than just a “cloud” company; the company provides theleading cloudplatform for helping enterprises provide secure, high-performing userexperienceson any device, anywhere. Theproliferation of mobile devices from the likes of Apple AAPL,Samsung, HTC, GoogleGOOG andmore all will add to the need for Akamai’s services.
Ifyou've ever shopped online, downloaded music, watched a web video orconnectedto work remotely, you've probably used Akamai's cloud platform. Thecompany’spromise is to ensure the best online experience on any device, anywhere.
Akamai deliversroughly 20% of ALL webtraffic globally.
Akamaihelps enterprises accelerate innovation in the hyper-connected world byremoving the complexities of technology and handling all the “leg work”ingetting content from the company to the consumer and beyond.
Their“Intelligent Platform” reaches globally and delivers locally, providingcustomerswith unmatched reliability, security and visibility into their onlinebusiness. This platform comprises more than 95,000servers located across nearly 1,000 networks in 70 countries worldwideand delivershundreds of billions of internet interactions daily.
Thecompany also tracks and defends against “attack traffic” on theinternet, helpingus all get the safest bandwidth possible. Globalinternet traffic is not only growingin raw content and users, but the speed at which we access that contentis alsorising rapidly.
MostZack’s Rank #1 stocks have recently experience very positive analystmomentumand Akamai is no exception.
Afterthe company delivered a 24% beat last quarter (42cents versus the ZacksConsensus for 34 cents), there have been a slew of positive analystrevisions. The Zacks Consensus for thecurrent and next quarters as well as FY2013 and FY 2014 are all higherthanthey were just 2 months ago, with none moving their estimates lower.
Akamaiis expected to report Q2 results on July 24th and given their ZacksRank coupled with an earnings ESP of 8.11% in the current quarter,there is avery good chance they will beat the current Zacks Consensus for 37cents. ESPs are also positive for the future, whichis a good sign for guidance.
AKAMhas beat the Zacks Consensus earnings estimates 4 periods in a row,exceeding expectationsby an average of 13.7%.
Since gapping almost 17% above the 200 daymoving average on their last earnings report, the stock added another15%, makinga new 52 week high of 48.47 over the last month.
Recently, shares havecome down to their postgap price around the $42.50 level, which is just above the 50 daymoving averageof $42.34.
Shares are in an oddarea here; I’d like tosee them trading above the $43.07 area, which coincides with a keyFibonaccilevel. If the stock breaks down here alongwith the broad market, look for strong support around $39.50 and evenmore atthe 200 day moving average of $37.81.
The reality is thatthe intermediate bullishtrend is intact, and a buy around these levels wouldn’t becatastrophic, butAkamai’s forward P/E of 26.5 may put it on the temporary chopping blockif thebroad market corrects.
Look for an initialupside target of $47.25,with another 5% breakout if shares eclipse the 52 week high.
Akamaiis my favorite pick in the cloud space at the moment; Rackspace RAX, aZacksRank #5 Strong Sell, doesn’t look nearly as attractive and trades atdouble themultiple and while HewlettPackard HPQ (ZacksRank #3 Hold) is trying to moveinto the space, they may have a long road ahead and are much less agileand “pluggedin” than Akamai.
JaredA Levy is one of the most highly sought after traders in the world anda formermember of three major stock exchanges. That is why you will frequentlysee himappear on Fox Business, CNBC and Bloomberg providing his timelyinsights toother investors. He has written and published two tomes, “YourOptions Handbook” and “TheBloomberg Visual Guideto Options”. You can discover more of his insights and recommendations through histwoportfolio recommendation services:
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