Trade of the Day: Akamai Technologies, Inc. (AKAM) Stock Offers a Speculative Option

Akamai Technologies, Inc. (NASDAQ:AKAM) — With a suggested “Buy at $61” on Wednesday, written on Tuesday night, this was clearly a bad call on my part: However, Standard & Poor’s reiterated their “Five-Star Strong Buy” on AKAM yesterday despite the 16% decline. They did, however, cut their 12-month target by $5 to $65, and their EPS estimates for 2017 to $2.56 from $2.89.

For those who bought on the opening at $53.90, support rests at the September 2016 low of $50.76, and just under that price seems like a good stop-loss area to me. S&P considers this decline as an “enhanced buying opportunity.” And since the stock is considered “undervalued” by the industry, S&P still views it as a possible “takeover target,” and views the company’s issues as “temporary.”

Fundamentals have not changed much, despite the technical destruction: Yesterday, AKAM stock beat Q1 earnings and revenue forecasts, but management missed with this current quarter’s outlook. This caused downgrades by four well-known analysts. Volatility in the tech industry is widespread as analysts recall the “Tech Wreck” of more than a decade and a half ago (as I did on Tuesday).

There is much technical support under the current price at about $53 and wide gaps down; in this situation 8 points, from $51 to $59, are often quickly closed by half. Those willing to take a high risk could make a quick 4 or 5 points from an entry point at about $51. However, this trade is not for the faint of heart, but for the speculator who is willing to protect this trade with a stop-loss order.


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