EOT Trade Alert – March 11, 2011

| March 11, 2011

March 11, 2011

Trade Alert:

   Buy AKAM August 2011 $40 Calls at $2.90 or better

Company Background:

Akamai Technologies (AKAM) is a content delivery company.  They provide services for accelerating and improving the delivery of content and applications over the Internet.

Short-Term Catalyst:

Digital media is a hot field.  It’s reshaping the way consumers and businesses want to access content.

Just about everything entertainment is available online.  You can buy and stream or download videos, music, and games with a click of your mouse.  And business content is shifting online as well.

Now businesses are fighting to survive and adapt.

How important is it for businesses to stay ahead of consumer trends?

Just look at the fates of Blockbuster (BLOAQ) and Netflix (NFLX)… Blockbuster didn’t adapt and now they’re in bankruptcy.  Netflix is leading the way in online content and their stock is up 185% in the last year!

Clearly the ability to deliver content online is the way of the future.  That’s where Akamai comes in… AKAM is the industry leader in helping businesses deliver the streaming videos and high quality content customers demand.

Demand for AKAM’s services drove sales to more than $1 billion in 2010.  And their goal is to reach $5 billion a year in revenue by 2020!

Clearly management has big expectations.

But here’s the catch… Management gave weaker than expected revenue guidance.  It took the wind out of Akamai’s sails.  The stock is down more than 25% since then.  But the selloff looks like it’s way overdone.

AKAM is still the leader in content delivery.  They’re expected to grow at better than 15% per year over the next five years.  And the shift from traditional media to more online media is only going to accelerate from here.  AKAM has the potential to deliver significantly better than expected growth going forward.

And to top it off, AKAM is coming into a significant support level near $35.  I’m expecting to see AKAM bounce back from oversold conditions in a hurry.

Let’s grab call options on AKAM now to profit from a rebound in this industry leader.

Trade Details:

Underlying Stock Symbol: AKAM
Current Bid-Ask Price: $2.76 – $2.82
Option “Buy Up To” Price: $2.90
Break-Even On Stock At Expiration: $42.90
Maximum Risk Per Contract: $290

Exit Strategy:

AKAM is trading at $35.91 per share.  Resistance levels will be at $43.50 and again at $47.  Remember, we want this stock to move higher.  Support levels will be at $32 and $30.  Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.




Category: EOT Trade Alert

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