Akamai sprinted higher after earnings as long-term shorts from the four-month decline were forced to cover. I am sure there are quite a few left that cannot believe the stock is continuing to climb. The resistance at $55 is eroding and Friday's close was 28 cents over that level. The stock appears primed for a breakout and another round of short covering.
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AKAM - Akamai Technologies - Company Description
Akamai Technologies provides cloud services for delivering, optimizing and securing online content for business applications on the internet. They are best known for their download delivery solutions for games, videos and audio files.
One of the things Akamai is famous for is archiving web content in centralized data centers geographically located to reduce the time and bandwidth needed to view those files. If you have a website that is visited by millions of viewers, Akamai can continuously monitor that website for changes and then replicate those changes in multiple locations so that viewers near those locations experience fast load times. For instance, a company in Kansas may have a high volume website viewed by people around the world. Akamai can replicate that website in cloud data centers in Los Angeles, New York, Miami, Dallas, London, etc, so a viewer close to one of those locations can get an immediate response time rather than having to pull the content from Kansas where bandwidth and server limitations could slow the response. If you have a million viewers a day all hitting the Kansas server from all over the world the lag time is going to be terrible.
Akamai also offers security solutions for web-hosted content thereby reducing infrastructure costs and increasing productivity.
Akamai reported Q4 earnings of 72 cents that easily beat estimates for 62 cents. Revenue of $579 million also beat estimates for $567 million. They announced a $1 billion buyback of 12.5% of their outstanding shares. CEO Thom Leighton said he was purchasing $10 million personally. The company guided to Q1 earnings of 61-64 cents and analysts were expecting 62 cents. Revenue is expected to rise +8%.
Performance and security revenues rose +16.4% to $286 million as demand for the cloud security products increased. Service and support revenues rose +17.8% to $46 million. Cash flow from operations was $218 million or 38% of revenue. Cash at the end of the quarter was $1.5 billion.
Akamai shares rallied 17% after the earnings on February 10th and reversed a four-month decline. Share barely consolidated after the spike and are continuing higher. Shares inched over resistance at $54.85 on Friday and could be poised to make a new leg higher.
Earnings are April 26th.
I am recommending an entry if AKAM traded at $55.75 and just over the Friday high of $55.55. Shares appear to be consolidating that post earnings run and the intraday ranges have been shrinking, which suggests the buyers are gaining ground.
With a AKAM trade at $55.75
Buy April $57.50 call, currently $1.67, initial stop loss $51.85.
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