It was a relatively sleepy week in the world of tech, with the Nasdaq closing up the week slightly with a 0.4% gain. However, while the broader market wasn't very lively, there were plenty of earnings reports and other news to send stocks soaring. Here are three of the week's biggest technology and telecom outperformers and some analysis on what sent them soaring.
Three of this week's biggest winners
Level 3 Communication
Source: S&P Capital IQ.
MetroPCS was among the market's biggest winners this week, on the back of better-than-expected earnings. The company posted adjusted EBITDA of $362 million, which was better than estimates of $328 million. Yet even with its large post-earnings gains, the most surprising news of the week came after the market closed on Friday.
According to The Wall Street Journal, Sprint Nextel
As Sprint investors should be well aware of in the wake of the painful Nextel debacle, telecom marriages are always a risky endeavor. While MetroPCS and Sprint's core wireless technology would work well together conceptually, this looked like a risky deal to take on while Sprint is prepping an expensive LTE program that's already stretching the limits of its debt-loaded balance sheet.
MetroPCS shares surged another 7% after hours, but the Sprint deal looks dead, and the next most likely bidder, Verizon
Thursday night, salesforce.com reported better-than-expected earnings and sales while also raising its full-year view. The company still expects to lose money this year on an accounting basis, but bullish investors focus on other areas like bookings growth and strong cash flows.
And that's really the crux of deciphering the investing enigma that is salesforce.com. The company does have a strong backlog of orders that come through in its strong cash-flow growth but aren't reflected in its GAAP earnings. Yet even with those other metrics, it's still hard to ignore how richly priced the company is. In the end, investors tend to either fall into a camp of believing salesforce.com has already dispatched Oracle in CRM and will continue expanding its cloud lead and addressable market into new technology areas, or that it's a richly priced bubble waiting to be popped.
Level 3 Communications
Unlike earnings superstars Salesforce and MetroPCS, Level 3 makes the list through the analyst-upgrade route. Morgan Stanley upgraded the Level 3 to a buy based on "accelerating revenue," "margin expansion," and "controlled capital spending." I'll be the most cautious on the first point; it seems the nebulous surge in demand for connectivity is always the driver that's "right around the corner" for the company. However, the final two points could be a bit more interesting. Level 3 acquired Global Crossing and promised huge cost savings. Early results have disappointed somewhat, but if Level 3 can deliver on its cost-saving promises, the case for investing in Level 3 gets a lot more interesting.
One more idea for the road
While all three of these companies are riding an explosion of data over the Internet and the coming mobile revolution in their own way, we think we've unearthed a hidden technology pick investors can't ignore. The Motley Fool has just released a free report on mobile, "The Next Trillion-Dollar Revolution," which details a hidden component play inside mobile phones that's also absolutely dominating the exploding tech market in China. Inside the report, we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report -- it's free.
Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Oracle. Motley Fool newsletter services have both recommended buying shares of and shorting Salesforce.com. 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.