Fastly Inc Stock’s Meteoric 376% Run in 2020 Not Over Yet

Fastly Inc up 800% From March Lows, But Still Has Lots of Room to RunFastly Inc, the Top Work-From-Home Pandemic Stock

Fastly Inc (NYSE:FSLY), a cloud computing services provider, is the best performing work-from-home stock during the COVID-10 pandemic. Fastly Inc stock is up an impressive 198% year-over-year, a whopping 376% since the start of 2020, and an eye-watering 798% since March lows.

These are the kind of moves that shareholders will champion, but those same gains might scare off potential investors, who believe all of the best gains are in the rearview mirror.

However, despite Fastly Inc’s meteoric rise, there is every reason to believe the future is equally bright, if not even brighter, thus providing it plenty of room to run.

Fastly reported strong second-quarter results that included better-than-expected earnings. The good times are expected to continue, with management raising the company’s full-year guidance to a range of $290.0 million to $300.0 million, from a previous guidance range of $280.0 million to $290.0 million.

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Many believe that Fastly’s gains are solely a result of the coronavirus pandemic and that the company’s share price will eventually come back down to earth.

The pandemic certainly put Fastly Inc on Wall Street’s radar, but you can’t peg the company’s momentum just to the pandemic. Fastly’s edge computing tech also makes it a fantastic long-term 5G play.

FSLY Stock Overview

Fastly Inc comes by its name naturally. The San Francisco, California-based Fastly is a content delivery network (CDN) company that helps the content on websites and apps run faster and better. Meaning, we can view digital content more quickly.

FSLY also provides security, video delivery, and edge computing services. (Source: “Why Fastly,” Fastly Inc, last accessed August 28, 2020.)

Admittedly, Fastly has benefited from the shift to working from home. But that trend is expected to last even after some employees go back to their cubicles. At the same time, the combination of employees working remotely and self-isolation orders has resulted in more people spending time on their computers, shopping, streaming, and watching videos.

Not surprisingly, Fastly Inc has been gaining traction from the surge in online traffic that has come as a result of people using video and messaging apps from companies like Slack Technologies Inc (NYSE:WORK) and GitHub, Inc.

At the same time, the company’s e-commerce customers, like Shopify Inc (NYSE:SHOPY) and Wayfair Inc (NYSE:W), have seen their online traffic surge over the last number of months.

And Fastly is fast. Thanks to Fastly, BuzzFeed, Inc. is now 50% faster, with page load times dropping to just 0.5 seconds from 1.5 seconds. On election night, The New York Times had two million concurrent viewers, accessing real-time updates.

In addition to these heavy hitters, Fastly’s other customers include Vimeo, Pinterest Inc (NYSE:PINS), Airbnb, Inc., Spotify, and Stripe.

Chart courtesy of StockCharts.com

Strong Q2 2020 Revenue & Adjusted EBITDA

On August 5, Fastly announced that revenue, for the second quarter ended June 30, increased 62% year-over-year to $75.0 million. Wall Street was looking for second-quarter revenue of $71.4 million. (Source: “Fastly Q2 2020 | August 5, 2020 Shareholder Letter,” Fastly Inc, August 5, 2020.)

During the quarter, FSLY’s total customer account increased by 114 (6.2%) to 1,951, from 1,837 in the first quarter of 2020. The company’s total enterprise customer count also increased to 304 from 297 in the first quarter, accounting for 88% of Fastly’s trailing 12-month total revenue.

The company reported a second-quarter net loss of $14.0 million, or a loss of $0.14 per share. This was a marked improvement over the second-quarter 2019 net loss of $16.0 million, or a loss of $0.26 per share.

Fastly reported adjusted net income of $2.0 million, or $0.02 per share, compared to an adjusted net loss of $10.0 million, or a loss of $0.16 per share, in the same period last year. Wall Street was calling for an adjusted net loss of $0.01 per share.

Fastly Inc also reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $7.0 million, up from a loss of $6.0 million in the same prior-year period. This also represents the company’s first quarter of positive adjusted EBITDA.

The company ended the second quarter with $454 .0 million in cash, restricted cash, and investments in marketable securities.

Full-Year Guidance

Despite ongoing global economic uncertainty, Fastly Inc remains optimistic about the demand for its services. As a result, it raised its guidance for fiscal 2020. Fastly now expects to report:

  • Total revenue in a range of $290.0 million to $300.0 million, up from previous guidance of $280.0 million to $290.0 million
  • Adjusted net income per share of between a loss of $0.06 to a loss of $0.01, up from previous net-loss guidance per share in the range of $0.15 to $0.08

Analyst Take

Fastly Inc stock has made huge gains so far in 2020, but the company still has plenty of room to run over the coming quarters.

The company reported another quarter of exceptionally strong results, which included the largest quarterly increase in customer count since its initial public offering (IPO) in 2019. Thanks to strong demand for the company’s CDN and 5G edge computing services, Fastly raised its full-year guidance. All of which points to additional upside.