Shares of Limelight Networks plunged 18% in Friday’s pre-market trading as the content delivery network (CDN) company grappled with pricing declines during the fourth quarter, which led to lower revenues.
Limelight Networks (LLNW) reported an 8% sales decline in 4Q, which came in at $55.4 million year-on-year, and fell short of consensus estimates of $61.4 million.
Limelight Networks said on its earnings call that the company experienced higher traffic volumes on its network during the reported quarter due to the rise in the adoption of streaming services, which were offset by pricing declines that led to a fall in revenues.
The company reported an adjusted loss per share of $0.03 in 4Q versus analysts’ estimates of adjusted earnings per share of $0.02. It also announced the appointment of Bob Lyons as its new President and CEO. (See Limelight Networks stock analysis on TipRanks)
Limelight’s new CEO said, “Our immediate focus is the challenges we faced in the fourth quarter, specifically top-line growth and the resulting pressure on margins. Quite frankly, performance in these areas is not where it should be. I believe in our ability to close the gaps and position Limelight as a leader delivering edge-based solutions.”
Lyons added, “I am confident in the direction we are headed, in our ability to better execute on a refined strategy and pursue rule-of-40 performance.”
Earlier this month, Cowen & Co analyst Colby Synesael downgraded the stock from Buy to Hold and slashed the price target from $9 to $4.75. Synesael sees limited upside to the stock as growth in revenues could be hurt by pricing pressures.
The analyst had noted that while Limelight is experiencing a higher volume of traffic from its media customers including, Disney (DIS), this is being offset by price declines in excess of 20% to 25%, which could lead to a fall in revenues in 4Q FY20.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy rating. That’s based on 2 analysts suggesting a Buy and 3 analysts recommending a Hold. The average analyst price target of $5.89 implies 29.2% upside potential to current levels.