Send me real-time posts from this site at my email
Motley Fool

Here's Why Fastly Is Falling Even More on Friday

What happened

The stock market was in a positive mood Friday with the major U.S. indexes up fractionally as of mid-afternoon. But that didn't stop edge-computing platform operator Fastly (NYSE: FSLY) from getting crushed for a second consecutive day. After shedding 27% of its value on Thursday, Fastly was down by another 5.5% as of 2 p.m. EDT.

Image source: Getty Images.

So what

There was no new company-specific news about Fastly Friday -- the day's decline appears to be simply a continuation of Thursday's selling, which was fueled by a disappointing preliminary third-quarter report.

In case you missed it, Fastly now expects to report Q3 revenue in the range of $70 million to $71 million, about 5% less at the midpoint than the previous guidance range. Management cited lower usage of the platform by its largest customer (TikTok) as the main reason.

Now what

First of all, it's important to note that even the new, reduced guidance range for the recently ended quarter amounts to year-over-year revenue growth of at least 40%. So it isn't as if Fastly's growth story is coming to a halt.

Second, it's not uncommon for a share price move like this to take a few days to play out, and that's what we're likely seeing Friday. Without getting too technical, selling often triggers even more selling. It wouldn't be too much of a surprise to see Fastly decline a bit more from this point before this specific plunge is truly over.

Finally, it's important to keep Fastly's news in perspective. The company cut its guidance from 49% revenue growth to about 40%. If you don't think a reduction of that size justifies a 32% two-day plunge in the stock price, now might be your chance to add this tech stock to your portfolio.

10 stocks we like better than Fastly
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Fastly wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fastly. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue