Limelight Networks Inc

Limelight Networks Inc (NASDAQ: LLNW) is a Software & Computer Services Company. The Company is engaged in the business of operating a distributed network and providing a suite of integrated services.

The Company will release Q4 and FY2020 results on 11 February 2021.

Investment Highlights - Limelight Networks Inc – Speculative Buy at USD 4.22

• The Company continued to make investment in strategy and launched Edge Functions to expand edge capabilities.
• In the last one month, the Company delivered a decent return of ~4.97% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales, EV/EBITDA, Price/Cash Flow and Price/Book Value multiples of the Limelight Networks Inc are currently lower as compared to the corresponding multiples of the Software & IT Services industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 90-day RSI is supporting an upside move (around 46 level), which means the stock price could increase in the short term.

Key Risks

• The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well.
• Any change in regulations and government policies could affect the overall business of the Company.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter and nine months period of the financial year 2020, the Company witnessed an increase in revenue by 15% and 24%, respectively.
• In Q3 FY2020, the Company witnessed an increase in loss, while for 9M period, the loss declined.
• The cash balance as on 30 September 2020 increased to $75,169 thousand (31 December 2019: $18,335 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance for nine months period of the financial year 2020. The revenue for Q3 and 9M period increased significantly, while profitability margins remained in the negative zone. The Company has witnessed an increase in liquidity position with the well-positioned balance sheet. The Company expects revenue for FY2020 to be in between $230 million to $240 million, and adjusted EBITDA to be in between $28 million to $35 million. Limelight Networks made significant progress across strategic imperatives and is on track to deliver record revenue for FY2020. The stock made a 52-week low and high of USD 3.43 and USD 8.19, respectively.

Based on the decent growth prospects, we have given a “Speculative Buy” recommendation on Limelight Networks Inc at the closing price of USD 4.22 (as on 13 January 2021).

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