What happened

Shares of Limelight Networks (NASDAQ:LLNW) crashed hard Thursday morning as the content delivery network's management updated its fourth-quarter guidance targets. Share prices fell as much as 29.5% lower in the morning, recovering to a 25.8% drop at 12:15 a.m., EST.

So what

Limelight set its full-year revenue guidance to roughly $196 million, down from $202 million in the previous round of guidance materials. Adjusted full-year earnings are now seen at approximately $0.11 per share, down from $0.16 per share. Hitting these targets would put fourth-quarter sales near $43.8 million and earnings at roughly $0.03 per share. The analyst consensus had been pointing to fourth-quarter sales in the neighborhood of $50.6 million and full-year sales of $202 million.

Young businesswoman shrugging with a confused look on her face.

Image source: Getty Images.

Now what

CEO Bob Lento explained that the updates are based on a deliberate shift toward video services and a focus on higher-margin opportunities. "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," Lento said in a prepared statement. "We're engaged with several large US broadcasters, and expect to generate substantial revenues from this group in 2019. Strategically, the low-latency video streaming business is seeing such high demand that we have committed to double our capacity for this product."

Based on these shifting business trends, Limelight aims for approximately $223 million of full-year sales in 2019 -- a 14% year-over-year jump that would exceed 2018's 7% of estimated revenue increases by a wide margin.

Stop me if you've heard this one before, but Limelight investors are shrugging off Limelight's stronger long-term prospects to focus on short-term revenue weakness. I think that's exactly the wrong reaction. If anything, Limelight is now trading at just 13 times its estimated next-year earnings, and this drop might be a great buy-in signal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.