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How Limelight Networks, Inc. Stock Rose 75% in 2017

Anders Bylund, The Motley Fool

What happened

Shares of Limelight Networks (NASDAQ: LLNW) gained 75% in 2017, according to data from S&P Global Market Intelligence. Believe it or not, that soaring return includes a 26% drop in December.

So what

After years of slow sales and negative earnings, the content-delivery specialist roared back to life in 2017 with four positive earnings surprises and a 17% annual rate of revenue growth in the latest report. Limelight is making a conscious effort to focus on high-quality contracts rather than chasing empty revenue calories, putting discounts and lowest-bidder strategies aside until further notice. Ironically (in a positive sense), that strategy didn't just expand Limelight's profit margins but also kick-started the company's top-line sales.

Limelight Networks' logo.

Image source: Limelight Networks.

Now what

"Quality over quantity" is the formula behind Limelight's big wins in 2017, and management is likely to stick to those guns for years to come. It's been at least eight years since the business looked this strong, and Limelight is pulling these numbers off in a market where some of the largest content delivery clients are building their own content networks instead of relying on third-party partners.

Curiously, Limelight's shares were headed for an even more impressive full-year return when largest shareholder Goldman Sachs decided to sell half of its 28% stake in the company. That announcement immediately sent share prices more than 10% lower, followed by a slower slide throughout December. All of this would have made sense if Limelight were printing new shares to cover Goldman's sales of 15 million stubs, but the entire sale came out of the investment firm's existing share stash. Limelight's share count did not increase at all that day. I wouldn't be surprised to see the stock chart turning upward again when Limelight Networks reports full-year results in early February.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.