Happy Thanksgiving! (AKAM, PRVD)
It's been a happy short week leading up to Thanksgiving so far for a few of my portfolio companies -- a nice way to fatten ourselves up before the big turkey day.
Akamai (AKAM) was, in my opinion, very underpriced given the potential demand for their services in years to come -- but I thought it would be several years before that was reflected adequately in their stock price. I found out about this one from a Fool newsletter a while back, and after reading up on them and the unique service they offer it seemed to me that Akamai was just waiting to be recognized for it's future potential instead of punished for it's past struggles during the Internet bust.
Then the Prudential analyst came along and said what everyone has been noticing, which is that high bandwidth products are proliferating like crazy on the web, and they're being produced and made available by the big media and web companies who are willing to invest in reliability and performance -- in other words, Akamai's customers.
AOL is putting old Warner TV shows online. Google Video is trying to add anything they can get their hands on. Apple is selling TV shows as well as the millions of songs that Ipod users are demanding. All of this takes a lot more work to squeeze through the pipes of the Internet than does a page of text or this little blog. And all the cognoscenti are predicting more and more video and interactive gaming online, which means more and more need for web optimization -- for which Akamai is now really the only viable supplier (following their acquisition of Speedera).
The article about Akamai's move provides some of the details. But what I found most interesting was that the new analyst upgrade is essentially just moving from a 2006 earnings prediction of 66 cents to 67 cents. That's an increase in earnings of 1.5% -- and the stock has moved up since then by about 15%. Put another way -- Akamai was a $2.5 billion company on Monday that was predicted to have earnings next year of $351 million. Today, they are expected (by this analyst, at least) to have their earnings move to $358 million ... and now they're a $3 billion company.
I'm not arguing with them -- I think Akamai was a good deal before and it's still in a pretty sweet spot given the increasing corporate presence on the web and their need for reliable high speed delivery of high bandwidth products and services ... but I do think this illustrates the silliness of analyst influence. Even if we do believe Michael Turtis, the Prudential analyst, and think he has incredible insight into Akamai's future, that couldn't possibly warrant this kind of spectacular response to what was a pretty tepid increase in estimates.
Of course, Akamai is a heavily shorted stock, too, so it's quite possible that this upgrade just put the fear of God into the shorters and started a little squeeze ... always fun to watch, as with Overstock a little earlier. Either way, it's nice to see the green.
Provide Commerce (PRVD) is also having a nice day today, as the light volume market rally continues (at least in my portfolio, I haven't checked the indexes lately). They did spike up over $30 for a little while, and I'm not sure exactly why, but over the past week the shares have climbed more than 15%.
I'd have to guess that Provide is being buffetted a little by holiday sales expectations at this point -- not unusual for such a small company entering into a key selling season. They do have a small and quickly growing business in specialty meats (Uptown Prime) and fresh fruit baskets (Cherry Moon Farms) that I have been somewhat dismissive of even as I love their flower business, but those businesses are in their window of opportunity to outshine expectations over the next couple weeks as the food and gift holidays take center stage. Maybe there's some optimism afoot.
These big holidays also mark the beginning of Provide's core season for flowers, which starts a little bit tepidly for Thanksgiving and Christmas but really explodes for Valentine's Day and Mother's Day -- I haven't seen the kind of advertising presence for Proflowers that I did last year and that I really see in the February-May period during their best months, but they do make money beginning with the Thanksgiving/Christmas season and, perhaps, that part of their business might have some good potential for growth.
Either way, as you're digging into your Australian lobster tails at Thanksgiving dinner (or turkey for all us traditionalists), raise a glass to a market that begins to appreciate the companies you've invested in.
Happy Thanksgiving, everyone.
Akamai (AKAM) was, in my opinion, very underpriced given the potential demand for their services in years to come -- but I thought it would be several years before that was reflected adequately in their stock price. I found out about this one from a Fool newsletter a while back, and after reading up on them and the unique service they offer it seemed to me that Akamai was just waiting to be recognized for it's future potential instead of punished for it's past struggles during the Internet bust.
Then the Prudential analyst came along and said what everyone has been noticing, which is that high bandwidth products are proliferating like crazy on the web, and they're being produced and made available by the big media and web companies who are willing to invest in reliability and performance -- in other words, Akamai's customers.
AOL is putting old Warner TV shows online. Google Video is trying to add anything they can get their hands on. Apple is selling TV shows as well as the millions of songs that Ipod users are demanding. All of this takes a lot more work to squeeze through the pipes of the Internet than does a page of text or this little blog. And all the cognoscenti are predicting more and more video and interactive gaming online, which means more and more need for web optimization -- for which Akamai is now really the only viable supplier (following their acquisition of Speedera).
The article about Akamai's move provides some of the details. But what I found most interesting was that the new analyst upgrade is essentially just moving from a 2006 earnings prediction of 66 cents to 67 cents. That's an increase in earnings of 1.5% -- and the stock has moved up since then by about 15%. Put another way -- Akamai was a $2.5 billion company on Monday that was predicted to have earnings next year of $351 million. Today, they are expected (by this analyst, at least) to have their earnings move to $358 million ... and now they're a $3 billion company.
I'm not arguing with them -- I think Akamai was a good deal before and it's still in a pretty sweet spot given the increasing corporate presence on the web and their need for reliable high speed delivery of high bandwidth products and services ... but I do think this illustrates the silliness of analyst influence. Even if we do believe Michael Turtis, the Prudential analyst, and think he has incredible insight into Akamai's future, that couldn't possibly warrant this kind of spectacular response to what was a pretty tepid increase in estimates.
Of course, Akamai is a heavily shorted stock, too, so it's quite possible that this upgrade just put the fear of God into the shorters and started a little squeeze ... always fun to watch, as with Overstock a little earlier. Either way, it's nice to see the green.
Provide Commerce (PRVD) is also having a nice day today, as the light volume market rally continues (at least in my portfolio, I haven't checked the indexes lately). They did spike up over $30 for a little while, and I'm not sure exactly why, but over the past week the shares have climbed more than 15%.
I'd have to guess that Provide is being buffetted a little by holiday sales expectations at this point -- not unusual for such a small company entering into a key selling season. They do have a small and quickly growing business in specialty meats (Uptown Prime) and fresh fruit baskets (Cherry Moon Farms) that I have been somewhat dismissive of even as I love their flower business, but those businesses are in their window of opportunity to outshine expectations over the next couple weeks as the food and gift holidays take center stage. Maybe there's some optimism afoot.
These big holidays also mark the beginning of Provide's core season for flowers, which starts a little bit tepidly for Thanksgiving and Christmas but really explodes for Valentine's Day and Mother's Day -- I haven't seen the kind of advertising presence for Proflowers that I did last year and that I really see in the February-May period during their best months, but they do make money beginning with the Thanksgiving/Christmas season and, perhaps, that part of their business might have some good potential for growth.
Either way, as you're digging into your Australian lobster tails at Thanksgiving dinner (or turkey for all us traditionalists), raise a glass to a market that begins to appreciate the companies you've invested in.
Happy Thanksgiving, everyone.
Labels: AKAM
This article posted by One Guy @ 11/23/2005 12:12:00 AM 0 comments
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