Limelight Networks Stock Is A Speculative Turnaround Opportunity
2022.05.05 12:21
Internet content delivery network (CDN) provider Limelight Networks (NASDAQ:LLNW) shares plunged on its fiscal Q1 2022 earnings results. Despite having 19 of its top 20 customers achieving more than 20% revenue growth, sentiment turned negative with the falling benchmark indices.
Customer additions have been at the highest levels in five quarters. The Company has completed rebuilding its sales and marketing teams and announced the acquisition of Edgecast, one of the largest independent edge computing platforms. Limelight will complete the acquisition in fiscal Q2 2022 and provide combined guidance upon completion.
The Company has replaced direct competitors in nine of its new logos for the quarter. Three pillars are driving the new growth with the Company in addition to its “Improve” program’s objective to bolster performance while reducing costs at the operations and architectural level.
Incremental improvement is expected with each quarter moving forward, also enabling quicker consolidation with the Edgecast platform, which is a key contributor to fueling the turnaround. Prudent speculators looking for a potential double-bagged can watch for opportunistic pullback levels in shares of Limelight Networks.
Q1 Fiscal 2022 Earnings Release
On April 22, 2022, Limelight Networks reported its fiscal Q1 2022 earnings for the quarter ended in March 2022. The Company reported a diluted earnings-per-share (EPS) loss of (-$0.04), matching consensus analyst estimates for a loss of (-$0.04). Revenues fell 13.3% year-over-year (YoY) to $58 million, beating consensus estimates for $56.15 million.
The client sentiment metric maintained high ratings for the third consecutive quarter. Cash gross margins rose 404 bps YoY. Flow-through of revenue growth to adjusted EBITDA was 77% YoY. Of the top 20 clients, 17 grew revenues by more than 20%. Limelight Networks CEO Bob Lyons commented,
“In the quarter, our operational improvements and renewed client focus have driven record traffic with 17 of Limelight’s top 20 highest historical traffic days landing in the quarter. We are proud of achieving the top performance spot in the world for edge CDN networks. This distinction anchors the transformation of Limelight from a media CDN to a leading edge enabled technology solutions company.”
Fiscal Full-Year 2022 Guidance Reaffirmed
The Company reaffirmed fiscal full-year 2022 EPS between (-$0.06) to (-$0.01) versus (-$0.05) consensus analyst estimates. Limelight expects fiscal full-year 2022 revenues between $240 million to $250 million versus $246.60 million estimates.
Conference Call Takeaways
CEO Lyons pointed out that the total pipeline grew over 30% from the beginning of the year. Layer0 grew by triple digits bringing in $3.8 million the quarter to at least $20 million for the year. Traffic improvements spanned streaming, live events, gaming, and software downloads.
The underlying pillars driving the momentum consist of operational performance, client experience, and a strategic pivot to deliver edge-enabled application and security solutions with Layer0. Lyons believes the Company has a complete AppOp solution for developers.
It delivers web applications’ protection and productivity, enabling the migration to an edge-enabled next-generation platform. This galvanizes confidence and creates deeper relationships with customers,
“With that confidence, they are more inclined to turn their traffic down towards us and evaluate our high-margin products. That in turn drives more traffic to our platform, improving our utilization and creating opportunities to deliver additional SaaS-like solutions. This all translates into a company that can sustainably and continuously create additional value for our clients and shareholders.”
Limelight Networks Stock Chart.
Limelight Networks Price Trajectories
Using the rifle charts on the weekly and daily time frames provides a broader view of the landscape for LLNW stock. The weekly rifle chart uptrend abruptly collapsed as shares tanked on earnings to lean down to the $3.23 Fibonacci (fib) level. The weekly 5-period moving average (MA) is falling at $4.79 as the 15-period MA stalls at $4.44.
Shares sold through the weekly 200-period MA support at $3.94 and coiled off the weekly 50-period MA at $3.38. The weekly lower Bollinger Bands (BBs) sit at $2.54. The weekly stochastic formed a stochastic mini inverse pup from collapsing under the 80-band as shares tanked.
The weekly market structure low (MSL) buy trigger support sits at $2.93. The daily rifle chart downtrend has a falling 5-period MA resistance at $4.13, crossing through the daily 50-period MA at $4.62, followed by the daily 15-period MA falling at $4.79. The daily 200-period MA held support at $3.43, enabling a coil back up through the daily lower BBs at $3.46.
The daily stochastic fell through the 20-band and stalled at the 10-band to trigger a cross-up or a mini inverse pup. Speculators can look for opportunistic pullbacks at the $3.22 fib, $2.98 fib, $2.67 fib, $2.38 fib, $2.20 fib, and the $2.01 fib level. Upside trajectories range from the $4.31 fib to the $6.54 fib level.
