As investors continue to put their money behind tech-focused e-commerce businesses that provide a sense of stability in an otherwise volatile market, Fastly (NASDAQ:FLSY) stock is booming. The company known for its cutting-edge technology has made some unprecedented gains since the start of the novel coronavirus crisis. FSLY stock even earned the title as the best-performing U.S tech stock in the first half of 2020.
Fastly’s fast-paced growth can be attributed to the stay-at-home order that left employees working from home for the foreseeable future. The demand for the company’s services skyrocketed amid the crisis. Internet speed became a necessity as more people used videoconferencing and other tools to stay connected virtually.
With market gains as high as 868% in just four months, FSLY stock is definitely worth the investment as we make the shift to a digital-first environment.
Gaining Momentum With Cutting-Edge Technology
Cloud computing has been all the rage in the tech world over the last few years, and its growth was only accelerated by stay-at-home orders. Fastly’s cutting-edge technology put it in a great position to benefit from this trend.
The company operates a unique variation of cloud-based-infrastructure known as edge cloud to provide a number of tools at an accelerated speed. Its goal is to cater to a wide base of customers from gamers to educational institutions with services that help save connection time.
Fastly stands out from a sea of competitors for its content developer network (CDN) services. The company developed the technology, Lucet, which enhances system performance and cybersecurity.
“The system is built by developers for developers” according to Fastly’s founder, Joshua Bixby.
Fastly Delivers Tremendous Results
Since its IPO in 2017, Fastly posted exceptional growth and delivered impressive results in the first quarter of 2020. The company’s revenue grew by 38% in a year-over-year comparison along with an increase in its customer base by 22%. Moreover, as work from home became the norm, spending on Fastly’s platform increased by 33% on average.
Fastly also raised its guidance in Q1 from $265 million to $290 million in lieu of increased internet usage during the pandemic. The forecast-beating results in the first quarter helped boost FSLY stock price, which is currently trending above $90.
Looking ahead, Fastly hopes to continue its winning streak. According to Yahoo Finance, analysts expect earnings per share of $-0.13 and revenue of $288.52 million, which would be 43.93% higher than the previous year. The company will also get one step closer to profitability as it expects to grow its market value to $35.4 billion by 2022.
Investors are hoping to make some big gains on Fastly stock when the company reports earnings on Aug. 5.
Long-Term Prospects for FSLY Stock
Fastly put up some big numbers since its IPO. In order to stay relevant in the competitive world of cloud computing, the company needs to capitalize on expertise and grow market share.
Shopify’s (NYSE:SHOP) recent partnership with Walmart (NYSE:WMT) is a huge win for Fastly that boasts the e-commerce platform as one of its biggest clients. As Shopify expands its customer base, the CDN service provider can use this opportunity to create a name for itself by facilitating increased internet traffic for the platform. This could pique the interest of other e-commerce businesses and allow Fastly to acquire more high-profile clients.
The pandemic has also given Fastly the unique opportunity to scale operations at an unprecedented rate. However, in the long term, Fastly is likely to focus on the most common solutions used by clients and use this to drive operational growth. Scaling its most-used services will allow Fastly to increase profitability and efficiency at a faster pace. This will be in contrast to the highly customized solutions that the company currently provides.
The Bottom Line on FSLY Stock
Although Fastly’s future is seemingly bright, it would be wise to consider the competitive risks that exist. The recent surge in online traffic is largely attributable to the pandemic. As we move toward a new normal, the company’s fast-paced growth is likely to fade.
Nevertheless, Fastly does provide a service that is tandem with the digital future we are headed toward.
The company is worth the investment for its long-term growth potential. But stay alert because the market could pull-back once it gets past the pandemic-induced internet frenzy.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.