Limelight Networks (LLNW) Stock is a Bargain Streaming Play

Content delivery network (CDN) provider Limelight Networks (NASDAQ: LLNW) has remained “under the radar” for the past decade. The company’s global private network (GPN) platform provides bandwidth capacity to deliver streaming content for a number of major well-known brands including AMC Networks, FOX, Lionsgate, Marvel, Starz Entertainment and SBS. Its GPN has 70+ terabytes per second (Tbps) capacity and 100 GbE private fiber backbone connected to 1,000 ISP and last-mile networks with 130 worldwide Points of Presence. GPN enables content providers to bypass internet congestion and security “potholes” to seamlessly deliver content to the end-users, like a private toll-road. Its competitor Akamai Technologies (NASDAQ: AKAM) boasts an impressive CDN client roster that includes (NASDAQ: NFLX) , Microsoft (NASDAQ: MSFT) , NBC and YouTube (NASDAQ: GOOGL) . Limelight is a laggard that is potentially setting up for a decade long price range breakout that investors may want to take notice of as the streaming wars continue to heat up.

Q1 2020 Earnings Results

Limelight reported Q1 2020 results on April 23, 2020. The company beat estimates by $0.02 as revenues rose 31.7% year-over-year (YoY) at $57.01 million vs. the $54.66 consensus analyst estimates. The company raised guidance for FY2020 with topline revenue guidance to $225 million to $235 million versus $221.09 consensus analyst estimates and EPS guidance of $0.00 to $0.10 vs. $0.06 consensus. Limelight CEO, Bob Lento set the narrative of the conference call noting that COVID-19 disruptions around the world “elevates the importance the Limelight’s role in support the digital experience of global populations under isolation mandates”. The Q1 2020 revenues were the highest first-quarter revenues in its history.

Benefactor of the Pandemic

The stay-at-home measures from the COVID-19 pandemic bolstered CDN traffic which was offset by the cancellation of March Madness. Customer acquisition was still solid with average deal size growing at 50% YoY. The company introduced Live Push Ingest service which enables content providers to push live streaming video through their CDN. Limelight is seeing heavy interest of its beta test of EdgeFunctions, a serverless platform enables clients to deploy their own application functions at a network edge location. The company continues to execute on the four strategic initiatives: expanding capacity, expanding proactive network management, providing more client controls and driving innovation. International customers accounted for 39% down from 42% YoY. Limelight saw record traffic starting in the last two weeks of March into April mostly from video streaming. This was also offset by many of their larger global clients facing financial uncertainty as a result of the global pandemic.

Missing the Restart Narrative

The company chose to raise guidance but noted they don’t know when the pandemic will end nor what happens when life “returns to normal”. More transparency will be known in the next 90-days. Limelight feels they will be one of the few minority of companies that will meet, beat and raise expectations during the pandemic. While management was able to bolster the present pandemic beneficiary narrative, they didn’t raise the sentiment much in terms of the restart narrative. This places the stock in the “best it gets” narrative that caused Netflix shares to collapse after a strong earnings beat. Limelight shares tumbled the next day falling as low as $4.90. Management’s fumble may be an opportunity for investors to step in on this laggard streaming play as business is clearly improving.

Opportunistic Buy Levels

Using the rifle charts on wider time frames to lay out the playing field is suitable for swing traders and investors. LLNW is one of the very few stocks that have a rising monthly stochastic and moving average (MA) uptrend intact. The earnings results triggered a sell-the-news reaction causing shares to hit a weekly low of $4.90, setting up the market structure high (MSH) trigger under $4.90. Shares quickly recovered back towards the weekly 5-pd MA at $5.59, which needs to breakout in order to resume its uptrend. However, this is not possible without the monthly stochastic reversing its downward oscillation with a market structure low (MSL). During this downward oscillation, there are opportunistic entry levels at $5.12 Fibonacci (fib) level , $4.65 fib and $4.21 fib level. Nimble traders can scalp these levels initially for reversion and then with intraday trend. Swing traders can scale for overnight to multi-day holds. Long-term investors may consider a dollar-cost averaging approach with income generation through writing covered calls. Reaction to top competitor AKAM earnings on Apr. 28^th can be a catalyst to LLNW quickly basing or rug pulling down to the opportunistic levels.