Market Overview

Akamai Sets Up Ahead of Earnings

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Stocks with solid fundamentals showing bullish price action ahead of earnings always bear watching. Akamai Technologies (Nasdaq: AKAM) is in that boat now.

Earnings are due Wednesday after the close. A bullish chart doesn't always guarantee success for a stock, but recent price and volume trends in Akamai are sending a clear message for now: The market's expecting a solid quarter.

The Thomson Reuters consensus estimate is for earnings of $0.50 a share, up 11% from a year ago. Sales are seen rising 18% to $381.1 million. Akamai isn't growing as fast as it once was, but demand remains strong for the company's products and services. Over the past three quarters, sales growth has accelerated from 16% to 20% to 23%.

Akamai provides content delivery network services to media and entertainment companies. Its technology helps Web sites speed up the delivery of video and other content to viewers.

On December 6, shares popped 10% after the company announced a strategic alliance with AT&T (NYSE: T) to distribute content delivery network (CDN) solutions to AT&T customers.

The company also continues to make inroads in new business areas like Web security, network carrier products and cloud computing.

Akamai used to be a favorite of short sellers but not so much anymore. Short interest has been steadily declining in Akamai. As of January 15, 5.6 million shares were held short, down quite a bit from 8.7 million shares at the end of October.

Wall Street firms are flush with cash and feeling more confident about the economy which means 2013 could be a year of increased merger and acquisition activity. Akamai is no stranger to takeover speculation. Chatter has quieted down in recent months, but Google (Nasdaq: GOOG), IBM (NYSE: IBM) and Verizon Communications (NYSE: VZ) have been mentioned in the past as possible suitors.

Major averages remain in uptrends so it makes to target fundamentally and technically healthy stocks like Akamai. Its current technical setup brings a breakout over $42.52 into play. Selling pressure in the stock has been muted and Akamai recently showed good supporting action at its 10-week moving average.

Shares of Akamai outperformed Friday, rising 2.7% to $41.81. There was some conviction behind the buying as volume totaled 2.8 million shares. It normally trades about 2.5 million shares a day.

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