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Akamai Technologies jumped more than 13 per cent on Monday after Elliott Management, a noted activist hedge fund, disclosed a stake in the “significantly undervalued” cloud computing company, leading a US stock market that hit record highs on mounting expectations of tax cuts.
The Massachusetts-based company’s shares had recovered some of their ground in recent months after sliding to a one and a half year low in August, but the boost provided by Elliott has now almost erased the stock’s 2017 losses.
Elliott, led by the billionaire Paul Singer, is one of the most feared activist investors for its often aggressive stance. It has embarked on bruising corporate campaigns in recent years.
Akamai, which provides a cloud computing platform for companies including banks, insurers and asset managers, “possesses an unmatched network platform which provides a significant competitive advantage in its ability to deliver, accelerate, optimise and secure global traffic and business applications over the internet”, the hedge fund wrote in a regulatory filing made late on Friday.
Elliott said that among the changes it would seek through talks with Akamai’s board were an overhaul of its operations, management, capital allocation and board composition, as well a strategic review or sale process for all or parts of Akamai.
The tech company’s shares received another boost from Credit Suisse on Monday, which raised its price target from $55 to $75. The average 12-month price target of analysts surveyed by Bloomberg was $62.4 and Akamai’s stock was trading at $65 by midday in New York.
Akamai was the biggest climber in the S&P 500 on Monday, which is comfortably heading for its ninth consecutive month of gains. That would be the first nine-month streak of rises for the blue-chip US equity benchmark since 1982-83.
The S&P 500 rose 0.5 per cent by midday on Monday, propelled by another solid day for the materials, energy and financial sectors, all corners of the stock market that tend to do well when economic optimism is on the rise.
Utilities, traditionally a more defensive sector, was the only sector suffering a decline. The Dow Jones Industrial Average and Nasdaq Composite also hit fresh records.
The expected passing of a large US corporate tax cut has solidified the stock market’s robust 2017 gains this month, with a Goldman Sachs-constructed index of companies that pay a higher effective tax rate — and so should benefit from the legislation — rising another 1.2 per cent on Monday.
JPMorgan’s equity analysts reckon that the tax package is only halfway priced into the US stock market, and forecast that the S&P 500 will climb another 4 per cent early next year “on the back of tax reform catalyst, continued synchronised global economic growth and potential flows from developed market bonds and equities”.
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