Edge cloud platform Fastly (NYSE:FSLY) specializes in helping businesses speed up the delivery information, whether its through apps, websites or videos. This is undoubtedly a growth-oriented niche. Yet, some folks may be concerned that FSLY stock has been chopping around lately.
It might seem hard to characterize FSLY as a momentum stock if the trajectory has been sideways and non-directional. However, looks can be deceiving. Patient shareholders might be rewarded for riding out the chops and holding on for the next big move.
But will the next move be to the upside? That’s the million-dollar question, and the answer lies in Fastly’s ability to execute as companies shift towards a cloud-based information delivery paradigm.
And then, there’s that pesky TikTok issue. Back in August, Fastly CEO Joshua Bixby revealed that around 12% of the company’s revenues come from the TikTok app. How should traders respond to this?
FSLY Stock at a Glance
It would be no exaggeration to say that the onset of the novel coronavirus had a profound and positive impact on the FSLY stock price. Prior to March of this year, it was stuck in a frustrating range and couldn’t break through $25.
Today, traders would relish the opportunity to buy FSLY stock anywhere near $25. After mid-March, the bulls powered the share price up to $90.
Then, there was a period of several months in which the Fastly stock price bounced sharply up and down. The net effect was sideways movement for several months. It’s interesting, the way a stock can sometimes move violently yet go nowhere.
At the end of the day, it’s up to the company to prove its worth to the shareholders. Getting the stock to the next level will require growth in the company’s core business of helping businesses to create digital experiences quickly and reliably. So, can Fastly deliver?
Ready, Set, Grow
With so many businesses migrating their apps to the cloud, Fastly is poised to capitalize on this shift and thereby grow its market share.
Amazingly, Fastly’s addressable market is worth over $35 billion. Yet Fastly currently controls less than 1% of that market. Thus, there’s quite a bit of room for Fastly’s footprint to expand.
Meanwhile, Bixby suggested that the addressable market will grow and that’s due, in part, to the impact of Covid-19:
“As the global pandemic continues to accelerate the need for businesses to focus on digital transformation, the demand for a modern, fast, and secure edge platform like ours continues to increase.”
Since Fastly’s second-quarter revenues increased by 62% on a year-over-year basis, Bixby’s growth scenario is a reality, not a mere speculation.
Let’s Talk about TikTok
Even with all of that, the 800-pound gorilla in the room is still the TikTok app. There’s a perception that Fastly has relied too heavily on revenues stemming from TikTok.
If you’re a FSLY stock holder, then there’s a good chance that you’ve been following the TikTok saga. You’ll probably recall that President Donald Trump threatened to ban the app in the United States.
Seemingly at the last minute, TikTok’s operations in the U.S. were saved as an agreement was supposedly reached with some well-known American companies. As you might expect, the FSLY share price jumped when that development was revealed.
Your best bet will be to avoid trying to anticipate the twists and turns of the TikTok saga. It’s really just part of a much larger drama between the U.S. and China. The app is a pawn in a bigger game, and it’s not the most important piece of Fastly’s business model.
Instead, it’s best to focus on Fastly’s value proposition in a time when companies are increasingly relying on cloud tech. From that standpoint, confidence in FSLY stock as a timely investment is entirely justified.
FSLY stock holders can look past the TikTok saga, as it’s not central to Fastly’s success. The drama will unfold, but it will also pass. More important is the growth story as Fastly remains well positioned in the mega-migration to the cloud.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.