A small basket of internet information providers are ignoring broad market headwinds and posting new highs, exhibiting relative strength that bodes well for additional gains in coming months. These internet companies are lesser known than big guns Facebook, Inc. (FB) or Alphabet Inc. (GOOGL) but have booked stronger returns for shareholders while avoiding the wrath of D.C. politicians. By itself, that's a great reason to give these plays careful consideration.
There's little convergence between market capitalization and performance in this sector after tossing out household names, indicating that shareholders are squarely focused on each company's unique business opportunities and market advantages. And many of these plays lack big competitors, giving them the pricing power needed to ensure healthy growth trajectories well into the new decade.
Many folks will remember Akamai Technologies, Inc. (AKAM) as the poster child for the internet bubble era when the cloud solutions provider zoomed to an all-time high at $345 in 2000 and fell to 56 cents just two years later. The stock rallied strongly off that low, reaching the mid-$50s in 2007 before dropping off the radar, grinding sideways at resistance for more than seven years. It finally broke out in 2015, but upside was limited, stalling in the upper $70s.
Price action just cleared that resistance level and hit the highest high in 19 years. Accumulation readings have also surged in the past month, with a fresh crop of shareholders raising the odds that this positive feedback loop will intensify and lift the stock into psychological resistance at $100. Meanwhile, pullbacks into the upper $70s should now mark buying opportunities for those investors and market timers unwilling to chase the upside.
EverQuote, Inc. (EVER) owns and operates an online marketplace for insurance sales. The company came public at $20.59 in June 2018 and entered an immediate downtrend that posted an all-time low at $4.05 in December. The January effect took control a week later, generating a steady uptick that stalled in July just above $15. The stock gapped higher on heavy volume earlier this week and is now trading within 40 cents of the IPO opening print.
Breakouts above IPO opening prints can be dramatic and long lasting, clearing the last overhead supply from the bullish equation. Upside targets are often exceeded in this scenario because many Wall Street analysts have a tough time estimating the company's true market value. However, it is important to wait for the breakout to unfold before taking exposure because this magic number can mark a resistance level that takes time to overcome.
Cardlytics, Inc. (CDLX) markets advertising solutions to online and mobile banks. The company came public at $12.10 in February 2018 and zoomed into the upper teens a few weeks later. It posted new highs in June and September, topping out at $28.29 ahead of a steep downturn that hit an all-time low at $9.80 in December. The 2019 bounce has unfolded in two rally waves, with the second wave piercing the 2018 high in early July.
The stock posted an all-time high just two points above the 2018 peak a few days later and eased into a narrow trading range with support near $26. That level has now aligned with the 50-day exponential moving average (EMA), which generated a reversal on Wednesday. Short-term stochastics cycles are turning higher, predicting an uptick into range resistance, followed by a breakout that opens the door into the upper $30s.
The Bottom Line
These internet information providers have posted new highs in recent weeks while broad benchmarks have dropped to two-month lows. This relative strength predicts greater upside in coming months, offering potential buying opportunities for investors and market timers.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.