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Is Fastly a buy on the pullback?

The technology and cloud sector has been booming! Here is the breakdown on $FSLY, otherwise known as Fastly.

Current Price: $80.34

52/Wk High: $136.50

52/Wk Low: $10.63

Read below for the breakdown.

Fastly has stormed onto the stage and was quickly deemed one of the “stay at home” stocks of the COVID-19 pandemic.

$FSLY is a content delivery network which delivers in several segments. Those segments include security, streaming, private content delivery, and last but not least eCommerce.

Since the March lows, $FSLY has been on fire and rightfully so. With growth on the top and bottom end along with a booming sector, the stock was poised to rise in the first place.

Although on a long term basis Fastly stock has been on fire newly released earnings expectations tanked the stock in recent days.

Taking a look at the company’s most recent earnings, Fastly delivered a solid beat. Fastly reported a Q2 beat with an EPS of $0.02 versus the expected analysts consensus estimate of $-0.01.

Revenue further continued to grow for the fifth quarter in a row. Fastly reported Q2 revenues of $74.7 million representing 62% growth year-over-year.

Not only did Fastly deliver solid revenue and EPS numbers in Q2 but the company’s total customer count increased to 1,951 from the Q1 customer count of 1,837.

It is also important to note that Fastly delivered a Q2 GAAP gross margin of 60.2%, much higher than the 2019 Q2 level of 55.0%.

On the downside, Fastly continued to run an operating loss which came in at $14 million for Q2, higher than the Q2 2019 loss of $12 million. 

During the Q2 report management delivered solid guidance for Q3, with expected revenues of $73.5 million to $75.5 million. Since then though guidance has been decreased to a range of $70 million to $71 million, which caused the stocks major decline in recent weeks.

Management noted that this guidance decrease was due to a slow down in spending by its largest customer Bytedance and slowdowns within customer businesses. 

Moving into the balance sheet the numbers are not bad;

Total Debt: $30 million

Total Liabilities: $66 million

Total Assets: $608 million

Cash & Short Term Inv: $384 million

Based on the balance sheet the underlying fundamentals are strong and Fastly’s financial standing is not a huge worry.

Taking a look at the stock itself, Fastly has gotten quite a bit cheaper in recent weeks given that the Price to Sales ratio is now 35.63 times and Price to Book ratio currently sits at 16.16 times.

Given the numbers analysts maintain a bullish thesis. Currently the high price target sits at $83.63/share, representing a 3.40% upside.

Furthermore, the high price target sits at $100.00/share, representing a 23.64% upside while the low price target sits at $58.00/share, representing a -28.29% loss.

The big money on the other hand is not as bullish with just 55.11% of Fastly being owned by institutions. Top holders include Abdiel Capital Advisors, ICONIQ Strategic Partners, and Whale Rock Capital Management.

The technicals though are flashing an opportunity. After a major drop the six-month MACD is continuing to drop with a major downward momentum range of 3.94 down to -0.33.

Secondly, the six-month RSI sits at a low 38.53 with a lower CCI of -95.86. It is also important to note that Fastly currently trades a whopping 55 points off its highs.

In short Fastly is a solid company that simply got ahead of itself and pulled back incredibly hard. Long term I like the name, in the short term though it will be tough and waiting for a bottom is strongly advised. 


Disclaimer: This is not direct financial advice, simply opinion based on independent research.

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