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Strong Performance Trends for Most Internet Stocks in June

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Internet Software & Services subsector

The Internet Software & Services subsector continues to lead large-cap tech (technology) stocks. Companies in this industry include Yahoo! (YHOO), Equinix (EQIX), Verisign (VRSN), EBAY (EBAY), Google (GOOG), and Facebook (FB), providing investor returns of 0.04%, 1.46%, 1.83%, 2.33%, 3.58%, and 8.34%, respectively, during the week before the Greek referendum hit the markets.

Akamai Technologies (AKAM) diverged from its peers and came in at -0.66% in the week.

Of the seven stocks in the Internet Software & Services subsector, one stock generated negative returns, and six stocks generated positive weekly returns.

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Analyst recommendations

Of the 246 analyst recommendations covering the seven stocks in this subindustry, 161 analysts have a “buy” recommendation, 77 have “hold,” and eight have “sell.”

Analysts appear to have the view that this subsector will outperform XLK in the next few months.

Moving averages

The closing price for Akamai Technologies (AKAM) on Friday, June 26 was $72.37. It’s currently trading 0.61% above its 100-day moving average of $71.92, 3.57% below its 50-day moving average of $75.04, and 2.96% below its 20-day moving average of $74.58.

Earlier this month, Macquarie downgraded AKAM from “outperform” to “neutral” and attributed it to the downside risk in the stock’s valuation. Macquarie believes there’s a 10% risk to AKAM shares in the short term, as Over the Top (OTT) content may not pay off until 2016 and thus estimates for 3Q15 and 4Q15 need to be revised.

The closing price of Yahoo! (YHOO) on Friday, June 26 was $40.65. It’s currently trading 6.59% below its 100-day moving average of $43.51, 5.61% below its 50-day moving average of $43.06, and 3.10% below its 20-day moving average of $41.95.

The share price for Yahoo! fell 6.7% last month. It has underperformed the S&P 500 index by 6.43%. Analysts believe the major issue Yahoo! faces is the lack of vision. It’s not clear whether Yahoo! wants to project itself as an Internet tech company or an online media company.

Yahoo! presence in the mobile market seen as lukewarm

Yahoo! has been trying to break into the mobile market in the last few years. The company has launched several mobile apps (applications) that improve the way people use smartphones to read news and other information.

Although millions of users access Yahoo!’s content, there’s a less precise target audience for online retailers compared to social media giant Facebook. Facebook users check their accounts multiple times a day, thereby generating more revenue. Although Yahoo! users reached 400 million with the purchase of Tumblr, the company is way behind on attracting web traffic compared to Twitter and Facebook.

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