Categories Technology

Is Limelight Networks (LLNW) stock overvalued after reaching a 9-year high?

Shares of Limelight Networks, Inc. (NASDAQ: LLNW) gained over 102% to a 9-year high of $6.07 on Thursday, backed by bullish outlook. The stock has risen over 146% in the past six months. It is estimated that video-delivery platforms would thrive in the future, aided by the increase in viewership of online content.

Investors can expect to achieve capital appreciation as the high valuation offers bigger returns. Limelight continues to expand the business, reinvest money earned to increase profitability and lift the overall value of the business. The company believes that mobile phones would continue to be the primary mode of interaction for online content users.

analyst stock valuation high or low

The popularity of online videos is growing fast, making it the primary mode of video consumption. The company believes that as more content is made available in 4K resolution, more consumers would want to consume the higher-quality content, resulting in increased strain on Internet architecture and infrastructure.

The content delivery traffic growth rates are anticipated to continue rising, backed by increasing consumption of rich media content and larger file sizes, migration to the cloud, and continued growth rates of mobile device usage. This is likely to outpace falling average selling prices in the industry.

In the fourth quarter, Limelight swung to a profit from a loss last year, driven by a 37% jump in the top line. The business momentum accelerated primarily due to significant participation in multiple live and on-demand OTT launches by certain large media companies. Looking ahead, the company expects the top line to grow at a faster rate than the bottom line due to an increase in costs and expenses.

Read: Adobe stock hits record high amid cheaper competition

The company’s shares remained above the 50-day moving average of $5.04 and the 200-day moving average of $3.85. After taking into consideration the price/earnings-to-growth (PEG) ratio of 6.06 and forward price-to-earnings (P/E) of 51.91, the stock is termed as overvalued by the investors as the PEG exceeds 1.0 and the P/E ratio is high.

However, the PEG ratio is considered to be an indicator of a stock’s true value and the P/E could mean that high growth rates are expected in the future. Thus, the stock is likely to head higher. The market analysts, meanwhile, expect a decline in earnings in the near-term, due to the investments in video delivery and marketing.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

WBA Earnings Preview: Will Walgreens’ Q3 report bring cheer to investors?

Walgreens Boots Alliance, Inc. (NASDAQ: WBA) has been facing challenges due to higher operating costs, rising competition, and an unfavorable retail environment. These factors have put pressure on the drugstore

Main points from Accenture’s (ACN) Q3 2024 earnings report

Shares of Accenture (NYSE: ACN) rose 6% on Thursday, following the company’s announcement of its third-quarter 2024 earnings results. Although revenue and profits missed expectations, the stock jumped after the

ACB Earnings: Aurora Cannabis reports narrower Q4 loss on higher revenues

Aurora Cannabis, Inc. (NASDAQ: ACB) on Thursday reported a net loss for the fourth quarter of 2024. The company’s revenues moved up 5% year-over-year during the quarter. The Canada-based recreational

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top