Rapidly growing sales revenue and huge market potential are the top components of a winning stock. Fastly dominants in both areas.
Oct. 12, 2020
The ongoing pandemic has kicked the digitalization era takeover into fifth gear and with technological companies bidding for users’ attention, fast and reliable content speed has never been so important. That is exactly what Fastly (NYSE: FSLY) provides. Frustrated with limitations placed by their competitors, Fastly’s co-founder Artur Bergman set out a plan to change this. He said that Fastly owes its successes to not being afraid of taking on difficult challenges. Its technology speeds up companies’ websites and apps by using edge computing that moves processing closer so that organizations can connect to the cloud faster. The company has only reached less than 1% of its possible customers, proving that it still has a large runway for growth
The Bull Case
In quarter two of 2020, Fastly’s year-over-year sales increased by 62%, making investors sit up and pay attention. In the same quarter, the company’s earnings per share (EPS) of $0.02 outperformed Wall Street’s prediction of an EPS loss of $0.01. In the past month alone, Fasty share price has gained almost 50%.
Since Fastly’s biggest customer, ByteDance’s TikTok, accounts for around 12% of its total revenue, the company has attracted a lot of investors. However, TikTok is not the only big name on their client list. Shopify, Spotify, Slack and Amazon all use Fastly, along with an impressive 114 new customers in their second quarter.
Fastly’s ability to speed up monitoring and programming IT systems will allow it to offer its products to other cloud infrastructure companies, as well as general IT and customer relationship management firms. Tech giants, such as ServiceNow, Microsoft and Salesforce, could very well be challenged by the rapidly growing Fastly.
The pandemic increased sales for Fastly, with companies wanting to improve consumer experiences on their websites and apps, but what will happen to the stock price when the pandemic is behind us? In what is becoming a tech-dominant world, Fastly will still be a popular technology, even if a vaccine is found, as the tech sector is predicted to only pull back around 10-15%. Given that Fastly is still a relatively new company that has huge growth potential with its superior programming tools, its stock will likely rise well above any drawback experienced by lockdowns being lifted and people finally being able to entertain themselves outside of the house again.
It’s easy to see why the bulls are backing this stock, the company’s second-quarter revenue soared above $74 million, and in other positive news, Fastly acquired Signal Sciences for $775 million. The cybersecurity company will accelerate the growth of Fastly and enable it to offer a cybersecurity product as well.
The Bear Case for Fastly
The company did experience an 18% drop in stock price in August over fears that TikTok might be banned in the U.S. America being a dominant audience market for TikTok, coupled with the video-sharing app being Fastly’s biggest customer, has resulted in investors remaining focused on TikTok’s position stateside. A new deal on the table which would see Oracle and Walmart taking a joint 20% stake of TikTok may resolve worries around Fastly stock price and give the company the stability it deserves.
TrustRadius, a software comparison company, stated that Fastly is not a good choice for smaller companies as it does not implement as easily into large cloud providers. However, the software review website also stated that Fastly is ‘best-in-class’ for what it was designed for. As there is a long list of ‘big tech’ names in the world to choose from, the company still has a huge market of clients to go after without worrying about not suiting smaller organizations.
So will you be buying Fastly stock?
With some of the biggest names in tech on their client list, opportunities for future growth into other markets, and an ambitious co-founder behind them, this stock is definitely one to consider. This company isn’t going anywhere fast-ly.
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