3 Top Movers: Akamai Technologies, Netflix, and Twitter

Akamai Technologies and Netflix outperform, while Twitter gets slammed

Feb 9, 2014 at 6:45PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Despite opening the week with a sharp loss, U.S. stocks managed to finish the week ahead, ending a three-week losing streak. The benchmark S&P 500 rose 0.8% year to date, while the narrower Dow Jones Industrial Average (DJINDICES:^DJI) gained 0.6%. Technology/media large-cap names Akamai Technologies (NASDAQ:AKAM) and Netflix (NASDAQ:NFLX) were among the best performers in the S&P 500, while shares of Twitter (NYSE:TWTR) suffered a bloodletting.

Akamai Technologies was the best-performing stock in the S&P 500 this week, up 18.8%, after announcing stunning fourth-quarter results on Wednesday afternoon. Revenue and adjusted earnings per share rose 20% and 11% relative to the prior year quarter -- enough to beat Wall Street's consensus estimates. The company also offered guidance on earnings per share for the current quarter that was higher than the then-consensus estimate (analysts subsequently raised their estimates for first quarter and full-year 2014 earnings-per-share). CEO F. Thomson Leighton summed things up by stating: "We were extremely pleased with how the business performed in the fourth quarter and throughout 2013, with strong growth across all our solution offerings and geographies." I won't disagree.

For more on this story, Brian Nichols looks at whether post-earnings gains at Level 3 and Akamai will be short-lived.

Shares of Netflix, up 5% this week, appear to be still basking in the glow of a superb Jan. 22 earnings report (the stock was the best performer in the S&P 500 that week). It may have been helped by a mea culpa from Morgan Stanley; in a report published on Jan. 31, analysts Scott Devitt and John Egbert wrote: "We thought Netflix would enter a period of slowing U.S. sub growth before international users could offset the slowdown. We were wrong."

Consequently, they upgraded the stock to "equal weight" from "underweight" (they had only just downgraded the shares on Jan. 7, causing them to lose nearly 6% that day). We applaud the Morgan Stanley analysts for having the intellectual honesty to call themselves out.

This illustrates that shares of Netflix are highly volatile and analysts' recommendations are poor guideposts for long-term investors.

Despite recovering nearly 9% on Friday, shares of another growth darling, Twitter, were brutalized this week, down almost 16%, after the company reported its first set of quarterly results on Wednesday afternoon. The enormous momentum that had pushed the stock up more than 150% from its IPO offering price reversed after hitting a concrete wall in the shape of relatively weak total user growth -- just 4% relative to the third quarter, with just 1 million U.S. users added in the fourth quarter. As I wrote on Thursday morning:

For the first time, it seems, investors are taking stock of the fact that Twitter is not a mainstream product -- and it may never be. As I have pointed out before, Twitter is less user-friendly than Facebook and its usefulness less is obvious -- these are barriers to widespread adoption... Twitter is hugely visible, in part because it is so popular with members of the media. However, that media "megaphone" cannot now mask the fact that it remains a niche product. Whether it can graduate to mainstream status will determine if it can grow into its valuation -- a task that has been made a bit easier with today's decline.

Even after this week's decline, the shares don't particularly cheap to me -- investors should carefully assess their own tolerance for losses before jumping into this stock, which is suitable only for risk capital.

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Alex Dumortier, CFA, has no position in any stocks mentioned; you can follow him on Twitter: @longrunreturns. The Motley Fool recommends Netflix and Twitter and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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