Cowen Downgrades Limelight Networks On Revenue Growth, Gross Margin Headwinds

Limelight Networks, Inc’s LLNW high customer concentration is causing severe pricing pressure that may create a significant impact on revenue growth, while underutilized capacity in South Korea could result in gross margin contraction in 2021, according to Cowen.

The Limelight Networks Analyst: Colby Synesael downgraded Limelight Networks from Outperform to Market Perform, while reducing the price target from $9.00 to $4.75.

The Limelight Networks Thesis: Industry traffic may grow substantially, but the impact of higher volumes from the company’s large media customers are being offset by price declines of more than 25%, Synesael said in the note.

This may drive “more muted top-line growth” from the fourth quarter of 2020 through 2021, he added.

“We believe this pricing pressure, coupled with Limelight’s revenue concentration among large customers as evidenced by its avg. revenue per customer of ~$110K in 3Q20, will drive an outsized impact on Limelight’s revenue growth vs. peers which we believe is not currently reflected in Street estimates,” the analyst wrote.

“We view upside as limited until LLNW-specific trends improve,” he stated.

LLNW Price Action: Shares of Limelight Networks had declined by 8% to $4.28 at the time of publication Tuesday.

(Photo: Dlhohler via Wikimedia Commons)