Buy or Sell Fastly Stock?

Fastly (FSLY) stock has jumped 36% during the past day, and is currently trading at $10.97. We believe there are a few things to fear in FSLY stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced.

Below is our assessment:

Love the FSLY stock? Great. But don’t get too attached. Stocks crash. High Quality Portfolio lets you navigate that risk.

Let’s get into details of each of the assessed factors but before that, for quick background: With $1.6 Bil in market cap, Fastly provides an edge cloud platform for processing, securing, and delivering applications globally, along with developer tools like Compute@Edge, solution libraries, APIs, and code resources.

[1] Valuation Looks Moderate

This table highlights how FSLY is valued vs broader market. For more details see: FSLY Valuation Ratios

[2] Growth Is Strong

• Fastly has seen its top line grow at an average rate of 13.7% over the last 3 years
• Its revenues have grown 7.4% from $531 Mil to $571 Mil in the last 12 months
• Also, its quarterly revenues grew 12.3% to $149 Mil in the most recent quarter from $132 Mil a year ago.

This table highlights how FSLY is growing vs broader market. For more details see: FSLY Revenue Comparison

[3] Profitability Appears Very Weak

• FSLY last 12 month operating income was $-139 Mil representing operating margin of -24.3%
• With cash flow margin of 9.3%, it generated nearly $53 Mil in operating cash flow over this period
• For the same period, FSLY generated nearly $-148 Mil in net income, suggesting net margin of about -25.8%

This table highlights how FSLY profitability vs broader market. For more details see: FSLY Operating Income Comparison

[4] Financial Stability Looks Strong

• FSLY Debt was $410 Mil at the end of the most recent quarter, while its current Market Cap is $1.6 Bil. This implies Debt-to-Equity Ratio of 25.7%
• FSLY Cash (including cash equivalents) makes up $321 Mil of $1.5 Bil in total Assets. This yields a Cash-to-Assets Ratio of 22.0%

[5] Downturn Resilience Is Weak

FSLY has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• FSLY stock fell 93.7% from a high of $117.86 on 9 February 2021 to $7.44 on 14 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $24.99 on 12 February 2024 , and currently trades at $10.97

 
2020 Covid Pandemic

• FSLY stock fell 55.8% from a high of $25.18 on 23 January 2020 to $11.13 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 7 May 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read FSLY Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.