Fastly Stock Has Pulled Back Precisely to the Buy Zone

Edge cloud platform provider Fastly (NYSE:FSLY) has been part of the acceleration of the global digital transformation for years. If you’re looking for a tech-forward investment that’s “on the edge,” so to speak, you won’t do much better than FSLY stock.

A magnifying glass zooms in on the Fastly (FSLY) website.

Source: Pavel Kapysh / Shutterstock.com

Technology investors have an added incentive to consider the stock now. The company recently posted financial data that shouldn’t disappoint the investing community.

And yet, the share price dropped. Some stockholders might be tempted to dump their shares as a result, but they might be selling at the worst possible time.

Instead, the price pullback can be viewed as a chance to accumulate the shares. As long as you believe in the future of the company, and edge computing in general, you can invest in the stock with confidence.

FSLY Stock at a Glance

As the name of the company might suggest, FSLY stock is a fast mover. If your timing is nimble, you might be able to get in before the share price spikes.

We’ve seen this happen a number of times over the past year. Indeed, the Fastly share price spiked to $100 in July, August, October and December of last year, as well as in early February of this year.

Therefore, the stock could be considered a dip buyer’s dream. And with the share price trading near $72 on Feb. 26, we have another dip that could be worth buying.

That’s a fairly steep decline from the Feb. 9 short-term top of around $117. Folks who bought near that price might learn a valuable lesson: price chasers often get punished.

Could FSLY stock spike again in the near future? It’s certainly possible, but more importantly, the stock is worth owning if you believe that Fastly has a strong fiscal profile. So, let’s delve into that topic now.

An Overreaction

The most recent correction in Fastly shares was, most likely, induced by the market’s reaction to the company’s fiscal fourth-quarter report.

In what might be considered an irrational response or at least an overreaction, shares of Fastly fell 15.5% after the quarterly financial data and guidance were released.

As it turns out, Fastly’s fourth-quarter revenues of around $82.6 million indicated a whopping 40% year-over-year improvement. Not only that, but this result was slightly better than Wall Street’s consensus estimate of $82 million.

There’s really nothing objectionable in terms of Fastly’s fourth-quarter top-line results. Evidently, what the market didn’t like was Fastly’s guidance for the upcoming first fiscal quarter.

For that quarter, Fastly expects to generate $83 million to $86 million in revenues. The midpoint of those figures would be $84.5 million, which is slightly below the analyst community’s expectation of $84.6 million.

Keep It in Perspective

You’ve got to admit, the market is nitpicking if it’s going to complain about Fastly’s modeling an average of $84.5 million instead of $84.6 million.

Fastly also anticipates a first-quarter earnings loss in the range of 9 cents to 13 cents per share. The midpoint of those figures would be 11 cents per share, and that’s below the analysts’ expectation of a loss of 9 cents per share.

It’s hard to imagine that a missing Wall Street’s earnings guidance expectations by couple of cents per share should cause such a steep share-price drop. After all, we’re talking about a $70 stock here, so a few cents should be kept in perspective.

CEO Joshua Bixby remains positive despite the investing community’s short-term negative response. “This growth was driven by continued demand for our edge platform by both new and existing customers,” Bixby commented.

To this we can add a significant stat: Fastly’s total customer count in the fourth quarter was 2,084. That’s a slight improvement over the 2,047 customer count from the third quarter. With that, it appears that Bixby is right to remain calm and confident.

The Takeaway

It appears that a revenue beat wasn’t good enough for FSLY stockholders this time around.

If you’re a dip buyer, then this shouldn’t be viewed as a problem. This stock is known for sharp price spikes. For all we know, the next spike could be just around the corner.

And as for Fastly’s forward guidance, it shouldn’t deter prospective buyers. As we’ve seen, the company remains a strong revenue generator in the edge cloud market.

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.


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