Limelight Networks, Inc.: Overlooked Tech Penny Stock’s Outlook Is Bullish

Limelight Networks Stock Is Bullish on New Initiatives & Acquisitions

With rising interest rates putting the fear of God in investors, it’s tough to find a small-cap tech stock with momentum right now. The tech-laden Nasdaq is down by 16.5% year-to-date and 5.5% year-over-year.

Limelight Networks, Inc. (NASDAQ:LLNW), however, has been bucking the trend. As of this writing, LLNW stock is up by:

  • 15.5% over the last three months
  • 75% over the last six months
  • 43% year-to-date
  • 40% year-over-year

And while it’s never fun to join a bandwagon when it’s slowing down, the outlook for Limelight Networks stock is robust.

In March 2021, the company announced a strategic plan to improve its growth and profitability. (Source: “Limelight Networks Announces Actions to Better Position the Company for Improved Growth and Profitability,” Limelight Networks, Inc., March 18, 2021.)

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The company’s initiatives include improving its core content delivery network business, simplifying its operating model, and improving its organizational productivity (including layoffs). Management expects the plan to result in annual cost savings of $15.0 million.

At the time Limelight Networks, Inc. announced its strategic plan, LLNW stock was trading around $3.50 per share. Limelight Networks stock experienced some pain over the following months, hitting a 52-week low of $2.30 in early-October 2021.

Since then, it’s mostly been uphill for Limelight Networks, Inc. The company has reported wonderful third-quarter results and record fourth-quarter results, set a new online traffic delivery record in December 2021 and January 2022, announced two acquisitions, and provided strong guidance for full-year 2022.

Chart courtesy of StockCharts.com

About LLNW Stock

Limelight Networks, Inc.’s content delivery network helps streaming video, mobile applications, music, e-commerce, live sports, software, and video games run faster, better, and safer.

The company says computing, deployment, edge, networking, observability and Web security together represent a $37.0-billion market opportunity. (Source: “Strategy Session 2021,” Limelight Networks, Inc., last accessed April 25, 2022)

The company’s clients include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Sony Group Corp (NYSE:SONY), and Walt Disney Co (NYSE:DIS).

In 2021, Limelight Networks moved into edge computing with its acquisition of LayerO, a provider of digital development, deployment, and monitoring tools. (Source: “Limelight Announces Acquisition of Layer0 to Accelerate Growth in Edge Application Delivery,” Limelight Networks, Inc., July 28, 2021.)

The acquisition advanced Limelight’s strategy as an edge-enabled service as a software (SaaS) provider. It will drive growth in the company’s revenue; margins; and earnings before interest, taxes, depreciation, and amortization (EBITDA).

The acquisition added several well-known companies to Limelight Networks, Inc.’s list of clients, including Coach, Kate Spade, Revolve Fashion, Sharper Image, Shoe Carnival Inc., United Airlines Holdings Inc, and several top-50 U.S. banks.

In March 2022, Limelight announced it was acquiring Edgecast, Inc. from Yahoo for approximately $300.0 million. Edgecast is a leading provider of cybersecurity, content delivery, and video streaming services.

The combined company will be a globally scaled, edge-enabled software provider with pro forma 2021 revenue of more than $500.0 million.

In anticipation of the merger with Edgecast, which is expected to occur in the second half of 2022, Limelight Networks, Inc. will rebrand itself as Edgio.

Record Q4 Results

For the fourth quarter ended December 31, 2021, Limelight Networks announced that its revenue increased by 14% sequentially and year-over-year to $62.9 million. (Source: “Limelight Networks Reports Record Fourth Quarter Results and Provides Strong Guidance for 2022,” Limelight Networks, Inc., January 20, 2022.)

The company’s 2021 fourth-quarter net loss improved to $7.7 million, or $0.06 per share, from a third-quarter 2021 net loss of $10.1 million, or $0.08 per share, and a fourth-quarter 2020 net loss of $8.3 million, or $0.07 per share.

Limelight Networks, Inc. reported 2021 fourth-quarter adjusted net income of $2.4 million, or $0.02 per share. That’s up from a third-quarter 2021 adjusted net loss of $1.5 million, or $0.01 per share, and a fourth-quarter 2020 adjusted net loss of $3.8 million, or $0.03 per share.

The company’s fourth-quarter 2021 EBITDA was $500,000, up from a third-quarter EBITDA loss of $2.0 million and a 2020 fourth-quarter breakeven EBITDA.

Limelight Networks, Inc.’s adjusted EBITDA improved to $9.7 million in the fourth quarter of 2021, from $6.1 million in the third quarter of 2021 and $3.6 million in the fourth quarter of 2020.

The company ended the fourth quarter of 2021 with cash, cash equivalents, and securities of $79.3 million.

Bob Lyons, Limelight Networks, Inc.’s president and CEO, commented, “We have made meaningful progress in our core business with dramatic performance improvements in our network, a revitalized go-to-market strategy and new product cadence.” (Source: Ibid.)

Strong 2022 Guidance

For fiscal 2022, Limelight Networks, Inc. expects to report:

  • Revenue in the range of $240.0 and $250.0 million, compared to $217.0 million in 2021
  • An earnings-per-share loss in the range of $0.27 to $0.22, versus $0.45 in 2021
  • An adjusted earnings-per-share loss in the range of $0.06 to $0.01, compared to $0.14 in 2021
  • Adjusted EBITDA in the range of $24.0 to $28.0 million, compared to an adjusted EBITDA loss of $24.4 million in 2021

“In the second half of 2021 we established a sustainable trajectory and in 2022, we expect to build on the momentum and the progress,” said Lyons. (Source: Ibid.)

“We have a revitalized network, a growing sales team and new products which should drive continued growth…”

Analyst Take

Limelight Networks stock has been on a tear since the company delivered on several of the key milestones in its 2021 strategic plan.

This has helped Limelight Networks, Inc. report record fourth-quarter financial results, which included significant growth in revenue, gross margin, and adjusted EBITDA.

In the second half of 2021, the company established a sustained trajectory, and it expects to build on this momentum in 2022. It won’t be all clear sailing, but Limelight Networks, Inc. is well on its way to providing LLNW stock investors with sustainable long-term upside.