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How Limelight Networks Shares Gained as Much as 11.9% Today

By Anders Bylund – Aug 27, 2018 at 6:44AM

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An analyst note said that this summer's share price drops have "disconnected" the stock from Limelight's fundamental business value.

What happened

Shares of Limelight Networks (EGIO -7.96%) rose as much as 11.9% on Monday morning, following a rosy research note from analyst firm Craig-Hallum. By noon EDT, the stock had cooled down to a 9.1% increase over Friday's closing price.

So what

Craig-Hallum started coverage of the content delivery network operator with a buy rating and a price target of $6 per share. That target price sits 37% above Friday's share price and 26% beyond today's boosted levels.

Analyst Jeff Van Rhee argued that the stock is "disconnected from fundamentals" on the heels of a 28% sell-off between May and August.

A blue Ethernet network cable, looped around to form a simple cloud shape.

Image source: Getty Images.

Now what

Turning away from its old deep-discount pricing strategy, Limelight has a newfound focus on higher-margin contracts and stronger service quality that has unlocked modest revenue growth and positive earnings in recent quarters. The bottom-line trajectory should continue to rise, as the company recently sent the final payment of a multiyear legal settlement with larger rival Akamai Technologies (AKAM 2.08%).

It's not surprising to see Limelight's share price rising on a gentle reminder that the company's business might deserve a premium valuation.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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