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Akamai Technologies (AKAM) is scheduled to report 3Q 2011 earnings after the close of trading on Wednesday, October 26. The Street estimate is for Adjusted Earnings Per Share (EPS) (per our methodology) of $0.33 per share, near the high-end of the range at $0.34 (Source: Yahoo! Finance). Revenues are seen climbing 10.0% to $278.87 million. During its 2Q conference call last July, Akamai predicted normalized (adjusted) EPS of $0.31 to $0.34 on revenue of between $273 and $283 million.

Note that the shares have sold off sharply in reaction to the prior three earnings releases. Last quarter, a slight miss on revenues sent the shares reeling in after-hours trading. But with the shares off more than 20% from the 2Q earnings release, the Street may be a bit more forgiving this time around. Expectations have also come down quite a bit, leaving the door open for a potential upside surprise.

Following the recent pullback, Akamai has been the subject of frequent takeover chatter, with possible suitors including Google (GOOG) and IBM Corp. (IBM). The company is also diversifying away from its content delivery network (CDN) business, seizing opportunities in cloud-computing and other growth area. Akamai is also seen benefiting from international expansion. Risks include recent pricing discounts and increasing competition from the likes of Limelight Networks (LLNW) and Level 3 Communications (LVLT).

Chart Review

-Akamai is more than 23% off the 52-week low of $18.25 established back on October 4. The 20-Day SMA recently crossed back above the 50-Day SMA – a sign of improving momentum.

-Near-term resistance is at $25, the lower end of the gap down following the prior earnings release. Above $25, there is room to run to $29.

-Support is at $23 (20-Day SMA), followed by $21.

click to enlarge

Source: Akamai Technologies: 3Q Earnings Could Bring Upside Surprise