Limelight Networks, Inc. (NASDAQ:LLNW) spooked investors after it warned that its full-year 2018 results might not meet expectations. The announcement accelerated a sell-off of the stock, which has remained under pressure for the better part of the second half of the year.
Shares of Limelight Network have come under immense short selling pressure on struggling to rally past the $5 a share level. A breach of the $4 a share support level appears to have reinvigorated short sellers who continue to push the stock to lower lows.
Given the strength of the downward pressure, the stock is at risk of plunging to one-year lows. Price action activity points to further movements on the downside amidst weakening fundamentals. The company trimming its full-year guidance has essentially spooked the markets amidst growing concerns about long-term prospects.
The content delivery, network management, company has trimmed its full-year revenue guidance to $196 million, down from initial guidance of $202 million. The company has also trimmed its full-year earnings, which it now expects to, come at $0.11 a share, down from initial guidance of $0.16 a share. Fourth quarter revenues are expected at $43.8 million compared to consensus estimates of $50.6 million.
The Chief Executive Officer, Bob Lento, tried to calm the storm by reiterating that the reduction was because of the new video-centric strategy. The company has had to forego immediate revenue generation streams as it moves to focus more on robust and fast-growing opportunities. The executive is projecting revenue growth starting next year as the company moves to focus on the new growth areas.
Low latency video streaming business continues to see high demand. Limelight Networks plans to double capacity to take advantage of the increased demand.
“Traffic volumes continue to grow in our core business — we’ve seen significant strengthening in late 4Q that we expect to carry into early 2019. We are engaged with several large US broadcasters and expect to generate substantial revenues from this group in 2019 ,” said Mr. Lento.
The Chief Executive Officer also expects the Ericsson initiative to contribute meaningful revenues staring net year. The two companies inked a strategic partnership in October to collaborate on content delivery as well as cloud services
The Ericson partnership comes at a time of growing need for high-performance networks and distributed infrastructure. According to Mr. Lento, a partnership with Erickson should enable Limelight Networks offer had even better reach and performance for customers
Limelight Network has also carried out a string of management changes that it says will support focus on future growth. The company has consequently confirmed the appointment of Patricia Haden and Marc DeBovoise into the Board of directors.
DeBovoise joins the board with vast experience having led major streaming services and promising streaming events such as the Super Bowl and the Grammys. Madam Haden, on the other hand, joins the company with vast experience and strategic knowledge in the matters media landscape. His invaluable experience in matters consumer insights should go a long way in driving business growth at Limelight Networks.
Investors have continued to push the stock lower in the market concerned by short-term revenue weakness. For long-term investors, this might be the ideal time to buy the stock given that it is currently trading at 13 times its estimated earnings
Given that the stock has taken a significant hit this year, it might be wise to wait for it to bounce back above the $3 a share level to consider it a bounce back play from the current lows.