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Why Limelight Networks Shares Fell 14.8% in July

By Anders Bylund – Aug 10, 2020 at 9:33AM

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The content delivery network company didn't crush Wall Street's second-quarter targets, and that was enough to inspire a mild rush of profit taking. Is Limelight a buy today?

What happened

Shares of Limelight Networks (EGIO 2.69%) fell 14.8% in July 2020, according to data from S&P Global Market Intelligence. The content delivery network (CDN) operator delivered a mixed second-quarter report. A few investors brushed off the company's solid sales to focus on soft earnings instead, cashing in some of their Limelight profits.

A curious businessman watches a red charting arrow crash down through the floor at his feet.

Time to buy? Image source: Getty Images.

So what

On July 20, Limelight reported a $0.01 loss per share, an improvement from a $0.03 loss per share in the year-ago quarter. Sales rose 28% to $58.6 million. The Street's consensus estimates had pointed to earnings near $0.01 per share on approximately $56.7 million in top-line revenue.

The stock fell 8% that day and continued to slide, adding up to a 20% drop in a three-day period.

Now what

This report was not published in a vacuum. Limelight entered July on a full head of steam, and investors are still enjoying strong returns, such as 49.5% year to date and 142% over the last 52 weeks. The company was thriving in the fall of 2019 as several new video-streaming platforms either hit the stage or planned their introductions in early 2020, and Limelight's CDN services played a large part in many of these launches. The lockdowns and work-from-home policies of the COVID-19 era only accelerated Limelight's business prospects.

I can't blame nervous investors for pocketing some profits in the face of a mixed earnings report, but Limelight looks like a winning investment idea at these slightly discounted prices.

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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