Oppenheimer Positive on The Internet Services Industry (AKAM, DFT, SVVS, TMRK)
Oppenheimer is out with a research report this morning, where it spins a positive view on the Internet services industry ahead of earnings. Oppenheimer expects most companies within their coverage to report relatively healthy 2Q10 results. Their favorite names going into the quarter are Akamai Technologies (NASDAQ: AKAM), DuPont Fabros Technology (NYSE: DFT), Savvis Inc. (NASDAQ: SVVS), and Terremark Worldwide Inc. (NASDAQ: TMRK). Long term, they also remain constructive on Computer Sciences Corp (NYSE: CSC) and Rackspace Hosting Inc. (NYSE: RAX).
Oppenheimer cited three subsectors of the industry, saying:
• Data centers: “We expect another quarter of solid results, driven by healthy volume growth and stable pricing trends. Booking activity appears to have remained robust, which bodes well for the 2010 outlook. Consistent with prior quarters, the focus will probably be relative upside versus expectations and 2010 guidance. Given relatively high expectations, we remain selective and our top pick in this group is DFT.
• Managed/IT services: We expect the return of pent-up industry demand to continue to benefit this group. While results should be largely in line, we see prospects for upside in specific areas. Recent datapoints suggest that IT demand continues to recover, with bookings tracking well through 2Q (which bodes well for 2010 outlook). We expect continued strong growth in cloud services to drive results in the next couple of years. Our favorite names are CSC, RAX, SVVS, and TMRK.
• Content delivery networks: We expect CDN volume trends to continue to accelerate in the next several years, driven by continued acceleration in online video adoption and higher availability of IP-based smart devices. We believe that this, couple with recent data points suggesting stabilization in pricing declines, should generate solid results. Our top pick is AKAM.”
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