Elliot Management has taken a 6.5% stake in the company
Shares of cloud services provider Akamai Technologies, Inc. (NASDAQ:AKAM) are surging today thanks to news hedge fund Elliot Management has taken a 6.5% stake in the company. According to the hedge fund, AKAM stock is "significantly undervalued." So far today the security has jumped 14.2% to trade at $65.96, taking out a few key technical levels in the process.
Specifically, the stock has barreled through a 50% Fibonacci retracement of its 52-week high to its 52-week low, located near the $58 level. The shares also filled their May bear gap and are now trading above their March highs. Since hitting an annual low of $44.65 on Aug. 21, Akamai stock has jumped 47.7%.
Analysts are calling for more upside, too. Credit Suisse this morning upgraded AKAM shares to "outperform" from "neutral" and boosted its price target to $75 from $55. The brokerage firm called the stock a "unique asset" and foresees multiple buyers in the event it puts itself up for sale. Meanwhile, Oppenheimer also lifted its price target by $20 to $80 -- territory not seen since 2000.
This strong price action could be catching a number of bears off guard. For starters, the majority of covering analysts have "hold" or "sell" ratings in place. Plus, short interest is elevated, rising 13.8% in the last two reporting periods alone, and now accounts for 6.4% of Akamai Technologies' float. Going by average daily trading volumes, it'd take short sellers a week to cover their positions.
It's a similar setup in the options pits, too. During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has accumulated a 10-day put/call volume ratio of 4.50, which sits just 2 percentage points from a 12-month high. Said differently, put buying has been unusually popular in recent weeks, compared to call buying.