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Fastly Inc. (FSLY) is a San Francisco-based cloud computing service provider that helps businesses provide quick, scalable, and secure online experiences with its suite of products and services. It operates as an edge platform, providing content delivery services with built-in security and encryption to customers in the media and entertainment, digital publishing, travel and hospitality, and technology industries. Formerly known as SkyCache, it changed its name in May 2012, and is valued at $1.19 billion by market cap.
Fastly stock has plunged more than 52% so far this year. Notably, the stock crashed twice in 2024 after reporting its quarterly earnings - once back in mid-February, and then again last week.
Solid Results, But Soft Guidance
Fastly reported its Q1 results after last Wednesday's closing bell, where the adjusted loss of $43.4 million, or $0.05 per share, came in narrower than analysts' estimate of $0.07 per share. Revenue stood at $133.5 million, slightly beating the consensus estimate of $133.0 million, and representing growth of 13.6% YoY.
Although Fastly’s quarterly results topped analyst’s expectations, its guidance fell considerably short. The company slashed its full-year revenue forecast from its previously expected $580 million to $590 million to a new range between $555 million and $565 million.
Management also projected a wider net loss for the full year, forecasting an adjusted loss of $0.12 to $0.06 per share. Previously, Fastly expected to report of loss of $0.06 to breakeven per share for fiscal 2024.
The stock crashed 32% on Thursday after the results - marking its worst one-day performance since Feb. 15, when FSLY dropped 30% after its Q4 report as investors reacted to disappointing guidance.
How Do Analysts Rate FSLY?
Analysts aren’t too pleased with the latest letdown from Fastly's management, as the stock's consensus rating has dropped from a “Moderate Buy” one month ago to a current ranking of “Hold." Out of the 12 analysts covering FSLY, 2 have a “Strong Buy” rating, 9 have a “Hold” rating, and 1 has a “Moderate Sell” rating for the stock.
Following the guidance miss, Bank of America (BAC) analyst Madeline Brooks lowered her rating on Fastly stock all the way to “Underperform” from “Buy.”
“Decelerating growth in Fastly’s largest customers, share loss in delivery, and limited visibility in 2H cause us to question a rebound in 2024," wrote Brooks in a note accompanying the double downgrade. "While we continue to like Fastly’s positioning in the edge compute market, we see it as a 2025 opportunity instead of a near-term growth driver.”
The analyst also slashed FSLY's price target by more than half, dropping it from $18 to $8. That implies expected downside of about 6% from Tuesday's close. Overall, analysts have a mean price target of $12.94, indicating a 52% upside potential from current levels.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
