- Limelight posted unexpectedly weak results in the quarter.
- Competition heating up.
- Fair value of over $6.00 explained.
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Bullish sentiment for Limelight Networks (LLNW) collapsed after the company posted weak quarterly earnings. Instead of beating expectations like it did last quarter, Limelight’s CEO alerted analysts to severely disruptive headwinds ahead. It cited everything from Covid-19 risks to large customer order slowdowns.
Limelight lost one-third of its value last week. The pre-earnings buy may have earned over 10% in gains but the investor lost the war as a buyer. What should investors do next?
Weak Results
Limelight posted a non-GAAP EPS loss of a penny despite revenue growing 15.4%. The unexpected loss implies increasing competition and cost growth. The company did not manage the capex spend in the quarter, as sales declined. In the period, it raised $125 million through a convertible debt offering. The increased liquidity will offset the tightening credit conditions ahead. And while the pandemic is worsening, hurting credit markets, the Fed may jump in to ease investor fears.
Below, LLNW stock cratered after the quarterly report:
Limelight won several edge deals and continued to progress its strategic plan. For example, it expanded its developer community. This will improve customer uptake over the next few quarters.
Some of its product enhancements, like Live Push, and the launch of its edge functions, will differentiate its offerings against the competition. Still, after Fastly’s (FSLY) drop in mid-Oct., investors do not want to pay a premium for LLNW stock. As shown below, the stock has several low scores in the Value category. Its overall value grade is a “C.”