FBR Capital Raises Price Target on Limelight Networks (LLNW) to $2.50; Reiterates Market Perform
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FBR Capital reiterated a Market Perform rating on Limelight Networks, Inc. (NASDAQ: LLNW), and raised the price target to $2.50 (from $1.50), after updating estimates. Management has completed cost reductions necessary to reposition the company to take advantage of a return to top-line growth, which looks achievable in 2017.
Analyst David Dixon commented, "We update our LLNW model to reflect changes in our revenue and margin assumptions. With the business now stabilized, management is working hard to generate sustainable high-margin revenue growth and improved profitability through (1) improved network latency and (2) increased throughput driven by investments in more efficient technology. While the CDN industry has recently been plagued by excess capacity, resulting in greater-than-expected price compression, overall traffic is expected to absorb excess capacity and to grow in 2017. Management has limited visibility regarding demand; but, from a cost perspective, investments in solid state drives (SSD) have helped LLNW to lower power consumption in its datacenters by ~60%, helping to drive gross margin expansion. Power consumption is the number one expense in all datacenters, outpacing rent. Furthermore, Cedexis data show that LLNW is performing well in throughput, which bodes well for the CDN's ability to increase market share. We like the repositioning efforts and positive momentum, but we await more positive signs of sustainable growth. If this materializes, LLNW could be a positive 2017 story. As such, we maintain Market Perform."
Shares of Limelight Networks, Inc. closed at $1.81 yesterday.
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