Stock (Symbol) |
Fastly (FSLY) |
Stock Price |
$67 |
Sector |
Technology |
Data is as of |
April 22, 2021 |
Expected to Report |
May 5 |
Company Description |
Fastly, Inc. (Fastly) is a real-time content delivery network (CDN) company. With Fastly, the user can manage traffic spikes and mitigate security threats. Fastly works with Google Cloud Platform to extend the user’s infrastructure and application logic for content delivery, backend workload, infrastructure costs and scalability. Fastly’s streaming media services offer global delivery of video content, whether it’s live or video on demand (VOD). The Company’s edge cloud platform, designed from the ground up to be programmable and support agile software development. Source: Thomson Financial |
Sharek’s Take |
Fastly (FSLY) turbocharges websites, and big brands are appreciative of the speed it provides. And now the company is integrating cybersecurity into its data flow with the acquisition of Signal Services, which is expected to add $30-40 million in revenue this year. But overall, analysts expect FSLY revenue to grow from around $290 million in 2020 to around $380 million this year. Take out $35 million and organic revenue growth is expected to be just 19%. Ugh! Meanwhile, the market leading Crowdflare is expected to deliver 38% revenue growth without the need to pad the stats with a big acquisition.
Fastly is an edge cloud computing platform that allows developers to build and deliver digital content at the edge of the internet, which improves speed of downloads.
Fastly and Cloudflare are the top-two edge computing stocks, in my opinion. Fastly has the better speed, while Cloudflare has stronger cybersecurity skills. On a valuation shandpont, Crowdflare sells for around 40x revenue compared to FSLY at 20x. That’s a big difference, and shows you how much investors admire one stock over the other. Also, Crowdflare already has its cybersecurity running smothely while Fastly is integrating Signal Services. FSLY does have a nice Est. LTG of 30% a year, so it seems like a good growth stock. But geeze, 20% organic revenue growth isn’t much for what is supposted to be a rapid grower. FSLY is part of the Growth Portfolio and Aggressive Growth Portfolio. But I will sell the stock from these portfolios on Monday. I think Cloudflare is superior. |
One Year Chart |
For much of 2020, Fastly was one of the hottest stocks in the market. Then it settled down as it lowered profit and revenue estimates due to issues with its largest customer. On the week FSLY reported last qtr earnings, the stock opened at $103 and closed at $81, and lost 20%. The stock’s been dead money ever since. FSLY has dropped from $107 to $67 since my report last qtr. That’s weak.
Last qtr I felt the Estimated Long-Term Growth Rate of 30% might be too low. This qtr I think this may be accurate. Just one qtr of profits during the past 4 and no profits on the near-term horizon. |
Earnings Table |
Last qtr FSLY reported a loss of 9 cents per share, which beat estimates of a penny. That stinks because business looked to be accelerating a qtr earlier as that profit estimate increased $0.05. Revenue increased 40% last qtr, but management was coy about how much came from Signal Services. In the conference call, multiple analysts asked them about it.
Annual Profit Estimates dropped a lot. For the 2nd straight qtr. Qtrly profit Estimates are for losses in each of the next four qtrs. And Estimates declined. For the 2nd straight qtr. Not good. |
Fair Value |
Since FSLY isn’t making a profit, and the fundamental outlook has gotten grey, my Fair Value comes down from 30x revenue estimates to 20x:
Current: 2021 Fair Value: 2022 Fair Value: This stock seems to have good upside. |
Bottom Line |
Fastly (FSLY) has a pretty ten-year chart. I think the product is fantastic for big brands that want the fastest website. But it seems Cloudflare has the “edge” in terms of cysbersecurity and revenue growth rate.
There was a lot to nit-pick about these numbers. On the conference call it seemedd analysts were not getting clarity on organic revenue growth. It seemed like management was hiding something. Since then, the stock’s gotten pushed ower and seems to have little momentum. Meanwhile, Clodflare broke out of a cup chart pattern last Friday as it jumped 10% on the day. FSLY will be sold from the Growth Portfolio and Aggressive Growth Portfolio. I like this stock, but am trying to reduce the number of stocks in my coverage and would like to focus on leaders in their markets. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |