Fastly’s (NASDAQ: FSLY) meteoric 2020 rise is making investors incredibly bullish for 2025. The American cloud service turned heads yesterday as the bulls drove a 13% rally in a day. However, optimism and extreme valuations can be a trap for some investors, especially in the technology industry. Thus, this article will provide an objective stance on the Fastly stock forecast for 2025.
Table of contents
- Why is fastly stock up?
- Fastly stock forecast 2025
What caused Fastly to surge 25% this week?
Most investors expect a catalyst to be the cause of Fastly’s 25% surge and not just general news. However, broad market announcements such as stimulus, vaccine updates, and lockdowns are the vehicles that the 2020 bulls are using. In Fastly’s case, it was the market optimism around possible stimulus checks for airlines, small businesses, and US citizens that drove the 25% rise. At face value, stimulus checks may have no relevance to Fastly’s surge. However, an anticipated increase in the overall health of the economy would see long FSLY investors snap up shares. Because the current price would be a discount, thus inducing FOMO.
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— Donald J. Trump (@realDonaldTrump) October 7, 2020
Fastly Stock forecast 2025
Financial commentators are providing bullish 2025 price forecasts. Wallet Investors is predicting FSLY to reach $771.265 by 2025, which if true would provide a ROI of 540%. Forward-looking earnings estimates for 2021 through 2025 is the main reason for the $700+ price target. For example, FSLY is anticipated to grow by at least 90% each year until 2025. If true, the compounding percentage growth in earnings over five years would be 450%. However, forecasts can be unrealistic when using technical analysis. Thus, it is best to put the price forecasts into a range and treat it just like that, a range. Fastly’s 2025 price range is $574.582 – $2077.09.
The financial lure of Fastly lies in its impressive historical and projection revenue growth. Fastly saw revenue rise by 45% between 2019 -2020. Partly because of the unprecedented demand for cloud services during the pandemic. However, analysts are not expecting the music stop anytime soon as they forecast a 115% increase in revenue between now and 2022.
Despite strong revenue, bearish investors would highlight the poor earnings forecasts. Analysts are projecting FSLY to remain unprofitable for the next three years. If we put the pieces together, high revenue but low earnings screams of competition issues. Because low margins only come about if FSLY’s neighbouring companies are forcing prices down.
Overall, FSLY does hold financial risk. However, if they can sustain impressive revenue growth over the next five and not just two years, then a 2025 investment could pay off. (opinion not advice)
Summary – YIG Takeaway
Before I begin, I remind our viewers that this is not financial advice. Instead, the information above is an investment commentary from extensive research.
Overall, a pullback with a period of consolidation is the likely short-term price movement for Fastly. Because their rapid share price expansion is unsustainable, which might be why insiders sold shares in recent months. Not to mention the overall market is undergoing trimming after 2020’s gigantic bull run. However, if FSLY can stride into profitability, improve EPS, and P/E forecasts, then the share price should follow. In which case Fastly could be well on its way to reach its 2021 and 2025 price forecasts. (opinion not advice) Revisiting Fastly after they release their Q3 earnings, the 5th of November, would be a smart idea.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Senior Manager of YIG.