Limelight Networks, Inc: Up 66% this Year, Opportunity on Horizon

Shares of Limelight Networks, Inc Up 66% this Year, Opportunity AheadLimelight Networks Provides an Innovative Avenue for Digital Delivery

Over the next decade, the importance of advanced networks—and, in particular, the secure delivery of digital content to users—will grow. A small-cap provider of high-speed private global networks to watch is Limelight Networks, Inc. (NASDAQ:LLNW). Its shares have risen 66% this year.

But while LLNW stock has delivered strong gains, my view is that there are plenty more opportunities to come. This is as companies look for fast and secure options to deliver their digital content, other than through the traditional public Internet.

Limelight’s clients include television, music, radio, newspaper, magazine, movie, gaming, software, social media, and technology companies, as well as governments.

A look at the chart of Limelight Networks stock shows the breakout from the tight sideways channel at $3.25.

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Limelight Networks stock managed to take out resistance at $4.00, but is currently stalling and looking for a catalyst to move toward $5.00.

Limelight Networks is hovering at the 50-day moving average (MA) but could move lower toward support at $3.40 on weaker relative strength index (RSI) and moving average convergence/divergence (MACD).

A move toward $3.40 or lower would be an aggressive opportunity for investors.

Chart courtesy of StockCharts.com

The Bull Case for LLNW Stock 

Limelight Networks, Inc.’s five-year revenue picture isn’t anything special, but the company did generate revenue growth in three of the last four years, including marking a five-year high in 2018.

Fiscal Year Revenues (Millions) Growth
2014 $162.3
2015 $170.9 5.3%
2016 $168.2 -1.6%
2017 $184.4 9.6%
2018 $195.7 6.1%

(Source: “Limelight Networks Inc.MarketWatch, last accessed December 13, 2019.)

A disappointment is that Limelight Networks is forecast to grow its revenues by a mere 2.1% to $199.75 million in 2019. It’s expected to come back with growth of 13.1% to $225.9 million in 2020. (Source: “Limelight Networks, Inc. (LLNW),”Yahoo! Finance, last accessed December 13, 2019.)

Limelight Networks has managed to produce positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in the last three years straight.

Fiscal Year EBITDA (Millions) Growth
2014 -$6.5
2015 -$4.8 26.1%
2016 $2.1 142.7%
2017 $18.0 774.1%
2018 $16.7 -7.3%

(Source: MarketWatch, op. cit.)

As far as profits go, Limelight Networks delivered positive earnings per share (EPS) on a generally accepted accounting principles (GAAP) and adjusted basis in 2018.

Fiscal Year GAAP Diluted EPS Growth
2014 -$0.25
2015 -$0.24 4.0%
2016 -$0.71 -195.8%
2017 -$0.07 90.1%
2018 $0.08 217.1%

(Source: MarketWatch, op. cit.)

Adjusting for one-time items, the company made $0.12 per diluted share in 2018. This, however, is expected to fall to a loss of $0.02 per diluted share in full-year 2019 before recovering to $0.08 per diluted share in 2020. (Source: Yahoo! Finance, op. cit.)

Furthermore, Limelight Networks managed to turn free-cash-flow-positive in 2018.

Fiscal Year Free Cash Flow (Millions) Growth
2014 -$18.1
2015 -$18.3 -0.9%
2016 -$3.0 83.6%
2017 -$15.2 -406.7%
2018 $3.6 123.7%

(Source: MarketWatch, op. cit.)

Analyst Take

Limelight Networks stock is not cheap, trading at a hefty 48 times its consensus EPS for 2020, but valuation is not that critical at this time as the company grows. The key will be the revenue side.

Insiders appear to be jumping on board this stock. Over the last six months, insiders bought 881,708 shares of Limelight Networks, Inc. and sold no shares.

The tailwinds for LLNW stock will be the expected demand for high-speed secured private networks.