Why Limelight Networks, Inc. Stock Dropped Today

Is Limelight Networks' volatility meaningful? Or just another movement?

Steve Symington
Steve Symington
Jul 23, 2014 at 4:53PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Despite detailing a positive new digital content delivery deal, shares of Limelight Networks (NASDAQ:LLNW) fell more than 10% in Wednesday's early trading before settling to close down around 3%.

So what: Specifically, this morning Limelight announced that free online strategy and MMO gaming specialist Plarium Global "has deployed the Limelight Orchestrate Content Delivery and Cloud Storage platform to enhance the performance, reliability, and experience of its online games." Those games are currently used by 90 million people worldwide, and around 3 million gamers every day. Perhaps most notably, Limelight says its solution was chosen after it "significantly outperformed its competitors [in Plarium's] extensive and anonymous Real User Monitoring (RUM) testing in multiple regions across the world." 

This in mind, I don't think today's drop makes much sense given the positive news. On that note, shareholders should remember we are talking about an already volatile small-cap stock that is neither profitable on a trailing 12-month basis, nor expected to turn a profit over its next fiscal year. 

Now what: What's more, such pullbacks shouldn't be terribly alarming considering shares of Limelight Networks have risen by nearly a third over the past two months alone. And the bulk of those gains occurred following early June news of both a single favorable insider stock purchase, as well as Limelight's rebuffing of a questionable unsolicited acquisition offer. In any case, and while I still prefer watching Limelight Networks from the sidelines, I don't think current shareholders should be overly concerned about today's fall.