Akamai Technologies, Inc. (NASDAQ:AKAM) — On March 31, Akamai was upgraded by Standard & Poor’s from a “Four-Star Buy” to a “Five-Star Strong Buy.” The upgrade to this provider of “cloud computing” is the result of an increase in demand for cloud computing and mobile offerings and a fall in the price of the stock, making it a better value.
In February 2016, management announced a $1 billion buyback program, and S&P’s target of $70 is based on discounted cash flow analysis, which takes the buyback into account. They concluded their analysis by noting an EPS increase of 10% in Q1 and that revenues were up 13% year-over-year when adjusted for foreign exchange.
Akamai Technologies is the world’s largest and “most trusted cloud delivery platform.” Thus the stock could be a takeover target, in the opinion of S&P.
AKAM traded sideways for much of 2016 before breaking out of a double-top at $59 in late October. The stock gapped up from $59 to $64, and finally triple-topped at $71. The third and last high was made in February 2017.
Since then, the stock has retraced its October breakout with the 50-day as resistance until prices fell to the 200-day moving average, now at $61. Yesterday the stock closed above its 50-day moving average, confirming that the decline has closed the gap opened on last year’s breakout and that the stock is in a bottom-making process. This provides a reasonable value point for a new position in Akamai.
Thus, traders should try to buy AKAM stock at $61 with a 6-month objective of a trade to $71 for a potential gain of over 16%.
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