Limelight Networks Inc (LLNW)

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Why Limelight Networks, Inc. Stock Plunged Nearly 18% Today
The content delivery network is leaving low-margin business on the table in order to focus on more profitable contracts. Some investors seem to be nervous about that idea.
Anders Bylund
(TMFZahrim)
Oct 19, 2018 at 2:53PM
What happened

Content delivery network operator Limelight Networks (NASDAQ:LLNW) is having a rough Friday. Following Thursday night's third-quarter earnings report, Limelight shares dove as much as 17.7% today. At 2:30 p.m. EDT, the stock had recovered slightly to a 14.5% drop.
So what

The funny thing is, Limelight's report really wasn't bad. The company met Wall Street's earnings estimates of $0.03 per share and came in just above analysts' revenue projections as sales rose 6% to land at $49.3 million. Looking ahead, management narrowed Limelight's full-year earnings guidance around the upper end of the previously communicated range while holding revenue targets steady.

Now what

To arrive at today's sudden plunge, Limelight investors also shrugged off the only meaningful analyst reaction to the company's results. Cowen analyst Jonathan Charbonneau maintained his "outperform" ratio and $6.50 price target on the stock (some 28% above today's share prices), arguing that the stock remains undervalued and misunderstood. As CFO Sajid Malhotra has explained in so many words, today's Limelight is perfectly willing to lose low-margin business volume in order to retain and grow in a less price-sensitive part of the content delivery market.

At this point, Limelight shares have gained 15% in 2018 to trade at 24 times forward earnings. For a company showing 45% year-over-year earnings growth, that does look like a bargain.

https://www.fool.com/investing/2018/10/19/why-limelight-networks-inc-stock-plunged-nearly-18.aspx