SAN FRANCISCO, March 29, 2011 /PRNewswire/ -- Merriman Capital, Inc. ("Merriman") research analyst Richard Fetyko and derivative strategist Joe Minton recommend the purchase of a long call butterfly in Akamai Technologies Inc. (Nasdaq: AKAM), a leading provider of services for the delivery of content and business processes over the Internet.
The Merriman team recommends purchasing the May 38/43/48 call butterfly as AKAM may rise with the reset of street expectations and continued growth in the high-margin VAS segment.
During 4Q10, Akamai renewed and repriced eight of the top ten contracts in the Media and Entertainment vertical, which led to a weaker-than-expected 1Q11 guidance. However, now that expectations have been reset and stock retreated over 40% since January, the Merriman analyst believes that the company will meet or exceed consensus estimates. As the volume in the CDN segment continues to ramp at around 50% rate, offsetting the price step-down in 1Q11, the revenue growth should gradually reaccelerate, leading to expansion of valuation multiples. The release of 1Q11 earnings results and 2Q11 guidance sometime in late April should be catalysts for the stock, which currently trades at the low end of the 10-16x EV/EBITDA ('11) range observed last year.
Minton recommends a purchase of the May 38/43/48 call butterfly giving investors exposure to upside while limiting risk to the cost of the position, as opposed to the cost of purchasing stock outright. The call butterfly is a low risk method of gaining upside exposure through the late April/early May earnings announcement. The butterfly limits volatility risk by purchasing two options (38 and 48 strikes) and selling two options (43 strike twice) in the same month.
About Merriman Holdings, Inc.
Merriman Holdings, Inc. (Nasdaq: MERR) is a financial services firm focused on fast-growing companies and the institutions that invest in them. The company offers high-quality investment banking, equity research, institutional services and corporate & venture services. Merriman specializes in four industry growth sectors: Technology, Telecom, Consumer, Media & Internet and CleanTech Infrastructure. For more information, please go to http://www.merrimanco.com/. Merriman Capital, Inc. is a member of FINRA and SIPC.
The data this communication is based on, including but not limited to, market valuations, calculations and other material is derived from sources believed to be reliable, however, Merriman Capital, Inc. ("Merriman") does not guarantee its accuracy or completeness. Opinions, ratings and estimates constitute the judgment of Merriman and are subject to change without notice.
This document does not constitute, and should not be used or construed as an offer to sell or a solicitation of an offer to buy any securities. Past performance is not indicative of future results. Merriman and/or its employees 1) may have a financial interest in the securities of; 2) may have received or intend to seek compensation for investment banking services from; 3) may have performed other financial services for; and/or 4) may act as a market maker in the securities of, issuers of the underlying securities of the option strategies described herein.
Merriman Capital, Inc. is a member of FINRA and SIPC.
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Note to Investors
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