One thing we could say about the analysts on Limelight Networks, Inc. (NASDAQ:LLNW) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, Limelight Networks' ten analysts currently expect revenues in 2021 to be US$226m, approximately in line with the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.15. Yet before this consensus update, the analysts had been forecasting revenues of US$256m and losses of US$0.056 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Limelight Networks

The consensus price target fell 16% to US$5.22, implicitly signalling that lower earnings per share are a leading indicator for Limelight Networks' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Limelight Networks analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$4.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 1.7% revenue decline a notable change from historical growth of 6.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Limelight Networks is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Limelight Networks. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Limelight Networks.