Bullish Analyst Note Sparks Upside for AKAM Stock

Morgan Stanley boosted its rating on the IT services provider

Morgan Stanley upgraded Akamai Technologies, Inc. (NASDAQ:AKAM) to "overweight" from "equal weight," saying the IT services company should benefit from accelerated security growth and stabilization in media. However, following the tech stock's recent technical troubles, the brokerage firm also cut its AKAM price target to $79 from $82, though this is still a 26% premium to last night's close.

In reaction, AKAM is trading up 1.8% at $63.81 this morning. Longer term, the shares have been trading in a channel of lower highs and lows since their late-June peak north of $83, and bottomed at an annual low of $57.18 on Jan. 3. A rebound off this bottom has Akamai Technologies stock back near its mid-December levels, and holding above former resistance at its 20-day moving average.

Despite receiving a rare downgrade to start of the year, AKAM stock has seen mostly bullish attention from analysts. Options traders, on the other hand, have been ramping up their bearish exposure in recent weeks, albeit amid relatively low absolute volume. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.10 ranks in the 89th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Elsewhere, short sellers have been in covering mode. Short interest fell 11.1% in the most recent reporting period to 8.08 million shares. This still accounts for a healthy 5% of AKAM's available float, or 4.5 times the average daily pace of trading.