Sometimes, we just have to give credit where it’s due. When Louis Navellier and the InvestorPlace research staff made their bullish call on Fastly (NYSE:FSLY) earlier this month, many traders were worried about Fastly stock.
In particular, they were concerned that Fastly might lose access to its biggest customer due to political issues. At the same time, Fastly stock was gyrating quickly and it was difficult to gauge the stock’s direction.
Since the publication of that article, Fastly stock jumped from the $76 area to its short-time peak of $85 on Nov. 20. With that, it’s tempting to declare victory and start taking profits.
Yet, I believe that there’s more upside ahead for Fastly stock. I’ll be the first to admit that the company’s recent fiscal data isn’t ideal, and we’ll certainly address this concern. Nonetheless, a bullish argument can be made in favor of this up-and-coming edge-computing services provider.
A Closer Look at Fastly Stock
Earlier, I might have given the impression that Fastly stock has staged a massive run-up. While the share price has embarked on a potential comeback, there’s plenty of room for upside.
The historical price action of Fastly stock clearly shows that it’s capable of going much higher. For instance, the stock spiked to $102 on July 9. Furthermore, it surged to $116 on Aug. 4 and then again to $128 on Oct. 13.
Interestingly, each of these share-price increases was followed by a swift decline. This suggests that it might be a smart idea to take profits as soon as you get them with Fastly stock.
Could Fastly stock be taxiing down the runway for another big move? It’s an exciting prospect as each recent price spike went a little bit higher than the previous one. No one knows when the next liftoff will occur, but you might feel a pang of regret if you miss it.
First, the Bad News
I want to paint the full picture for Fastly stock, including the good, the bad and the ugly. That way, informed investors can at least know what they’re getting into.
And so, it must be said that Fastly’s third-quarter fiscal results weren’t pretty. Wall Street was preparing for Fastly to report $73.57 million in quarterly revenues. Unfortunately, the actual result turned out to be $71 million in revenues.
Still, this result represents a 42% year-over-year increase in quarterly revenues. So, prospective investors have a choice. They can see the glass as half-empty, or as half-full.
Fastly CEO Joshua Bixby is choosing to take the half-full approach, citing his company’s customer growth. Indeed, it is commendable that Fastly’s total customer count increased from to 1,951 in the second quarter to 2,047 in the third quarter.
Quelling the TikTok Worries
Now, we must address the 800-pound gorilla in the room. I’m referring to Fastly’s biggest customer, ByteDance, which is the Chinese company that owns social media platform TikTok.
Due to perceived security-related concerns, the Trump administration threatened to crack down on TikTok and other Chinese apps earlier this year.
Trump’s Committee on Foreign Investment in the United States even went so far as to set a deadline for ByteDance to “divest any tangible or intangible assets or property, wherever located, used to enable or support ByteDance’s operation of the TikTok application in the United States.”
The deadline of Nov. 12 has come and gone, with no actions taken against Fastly’s client so far. Moreover, on Nov. 13 the Department of Commerce reported that it would not enact the U.S. TikTok ban.
To be more precise, the Department of Commerce said that it won’t enforce the order barring TikTok from operating in the U.S. “pending further legal developments.” Nevertheless, Fastly stock traders should consider this development a win for the bulls as the TikTok concerns may turn out to be overstated.
The Bottom Line
As you can see, the news about Fastly’s recent fiscal results isn’t all bad. Plus, the worries related to TikTok needn’t be a deal breaker for prospective shareholders.
And given Fastly stock’s propensity for swift price spikes, a stunning comeback might be just around the corner.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
