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One way to play the ever growing government reach under the Obama administration is to invest in internet companies that are helping the governments promise under Obama to be more transparent and internet centric. Terremark (NASDAQ:TMRK) fulfills that role as the Data Center operator that now runs some of the biggest government sites such as data.gov.

The stock is also on sale after being hit 15% after reporting a strong Q2 with revenue and EBITDA a the high end of estimates. Its the second time the stock appeared ready for a major breakout only to be hit by major selling.

The last time was in early July when fears of internet security issues sent its stock plummeting.

TMRK is highly leveraged like the typical data center/telecom provider of the 2000 era. It takes a lot of capital to buildout the data centers and thats been know different with TMRK. They recently completed a $420M debt offering. Thus they provide the opportunity to invest in a high risk leveraged play just as the economy is coming out of a recession. That's the best time to go down the balance sheet chain. It sure doesn't hurt to invest alongside Obama considering the risk if they weren't to meet targets.

TMRK just recently reported Q2 results that matched the high end of their guidance. Unfortunately though the stock tanked some 20% in the ensuing days. The reason for the drop wasn't apparent other then concerns from analysts like the one at Zacks that is worried about the debt situation.

  • We believe the company’s industry leading product/service portfolio, coupled with a differentiated execution strategy, uniquely positions it to leverage attractive market trends for managed hosting and colocation services.
  • While we are encouraged by the company’s ongoing expansion initiatives and healthy contract booking levels supported by the robust demand for its services, our primary concern remains the highly leveraged balance sheet as most of the expansion initiatives are being funded by debt financing.

Basically the analyst says if you like the sector then TMRK is the play. They have been hitting the high end of their numbers so the earnings report shouldn't have been a reason to panic and sell.

On the conference call management remarked that debt service costs will be $55M annually and in 2009 they expect EBITDA of $80-85M. Considering they have a growing corporate client base and a customer like federal government (Obama) growing by 30%, it seems reasonable that they'll meet those targets and some.

After all, EBITDA in Q2 was up 50% YOY. Revenue was up 17%. How many companies have reported that much growth during the Great Recession?

As long as TMRK holds the 200EMA currently at $4.75 this is a great place to load up.

Disclosure: Long TMRK in client and personal accounts

Source: Terremark Wordwide: Highly Leveraged Obama Play