It was only a year ago when Fastly (NYSE:FSLY) was a FinTwit darling, and now, the edge computing company has dropped by 59% in 2021, and 47% in 2022. It seems like just yesterday the stock was peaking at a price of $122.75 per share. Edge computing was once seen as the future of high speed data transfer between the source and the storage, and it may still be. But clearly the industry has fallen somewhat out of favor with growth investors, as Fastly stock has struggled to maintain momentum.
However despite a lack of investor sentiment, Fastly is still has a growing customer base and improving revenues. In particular, the company reported revenue improvements of 18% year over year to $97.7 million for the fourth quarter. Moreover, Fastly now has 2804 customers, reflecting 21% growth in customers from the year-ago quarter.
So why are investors fleeing from Fastly Stock? This article will breakdown everything investors need to know about the Fastly Stock Forecast.
Why has Fastly Stock struggled over the past 18 months?
So what happened with Fastly? Let’s call it a series of unfortunate events. It all seemed to go downhill for the company when its largest partner Tik Tok was forced to abandon the platform due to uncertainties in the ongoing geopolitical tension between the U.S. and China. Tik Tok struck a deal with both Oracle (NYSE:ORCL) and WalMart (NYSE:WMT) to oversee its U.S. operations, but the platform is still wholly owned by ByteDance in China. Unfortunately for Fastly, it lost out on its largest partner which saw the stock fall nearly 30% in a single session when the announcement was made.
With the current market hammering the tech sector over valuation concerns, Fastly Stock fell victim to a sharp drop in their share price following its Q4 results. Although the company’s fourth-quarter revenue and adjusted loss per share beat analysts forecasts, Fastly’s disappointing outlook has shaken the hands of investors. This has been a common trend amongst the largest tech companies in the US and speaks volumes on the confidence of investors in 2022.
Edge Computing at a Discount
The reaction to Fastly’s downfall was swift. Analysts across Wall Street downgraded Fastly’s stock, and significantly lowered its price target. Fastly stock hit a 52-week low of $19.13 yesterday, marking one of its worse days since its Tik Tok fall out. It is obviously clear that Fastly need to string together some strong quarters with better guidance to win back the faith of investors.
At the minimum Fastly will have to convince investors that it is acquiring more partners and actively working to expand its platform. In 2021, The company was approved for a patent called “load balancing across origins servers”. This development allows the company to respond to requests across multiple servers. Fastly is also rumored to be involved with Apple’s (NASDAQ:AAPL) new iCloud + Private Relay service. Investors are hoping this could be a lucrative revenue stream in a few years.
Fastly reaffirms $1 Billion revenue target by 2025
In Q3, the companies CEO reaffirmed the companies target to reach $1 Billion in revenue by 2025. For comparison, in the 2021 calendar year Fastly generated $354.3 million, beating their target of $350 Million. This means the company expects revenues to grow at an annual compound growth rate of 30%.
“As we continue to invest and execute against these opportunities, we are focused on achieving $1 billion in revenue by 2025. We have set clear milestones to drive success, including winning developers, enhancing our security offerings, and driving enterprise customer adoption. Combined with a strong roadmap of new products that we will discuss further in upcoming quarters, we are optimistic about the journey ahead of us.”said Joshua Bixby, CEO of Fastly.
Morgan Stanley Sees 2022 as a transition year for Fastly
In January, Morgan Stanley analyst Sanjit Singh initiated coverage of Fastly Stock with an Equal Weight rating and $43 price target. The analyst noted that Fastly’s software-driven approach to edge networking is translating to share gains in the content delivery networking, or CDN, market but Singh sees 2022 as a “transition year”.
Moreover, Singh notes Fastly growth came under pressure in 2021 after being an early beneficiary of the shift to remote work and the spike in consumption of online services. Overall, the analyst still sees Fastly having a significant market opportunity over the coming years. The current target from Morgan Stanley implies an upside of 100%+ but this may change following the companies lowered 2022 guidance.
Final thoughts – Fastly Stock Forecast
Despite the companies long bear run over the past 18 months, it seems to contrast the companies internal performance. With strong revenue growth and even stronger customer growth for the year, we can see why investors are beginning to question the recent market movements.
Fastly management will continue to have the arduous task of convincing investors that it series of unfortunate events are behind them. Nevertheless, Fastly’s recent rally on Wallstreet may suggest investors are already convinced.
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The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. 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.