What happened
Shares of content-delivery network (CDN) operator Limelight Networks (EGIO -3.41%) gained 25.5% in November 2020, according to data from S&P Global Market Intelligence. The stock was set up for a significant bounce last month after crashing 39% lower in October.
So what
The October plunge was based on a mixed earnings report in which Limelight beat Wall Street's revenue targets but fell short of analysts' earnings estimates. The earnings miss was explained by interest payments on a new debt balance of $105 million, and the lowered bottom-line guidance for the next quarter also corresponded to the same debt-service expenses.
Image source: Getty Images.
Now what
Investors gave Limelight Networks the cold shoulder due to a very reasonable and entirely intentional business move. With this extra cash on hand, the company is free to make some moves that it didn't have the financial muscle to do earlier, such as accelerated infrastructure upgrades or a modest acquisition.
The rebound in November looks strong at first glance but the stock is actually down by 23% since the end of September. There is nothing wrong with the company, but market makers are treating Limelight like a red-headed stepchild at the moment. Limelight holds a unique position in the CDN market, combining decades of experience with a collection of growth-boosting features such as edge computing services. The stock is priced for absolute disaster, while the business is firing on all cylinders. This is the buying window you've been looking for.
