Photograph by Kelvin Ang
shares are getting crushed on Thursday after the content-delivery network and security-software company issued disappointing June-quarter guidance and announced the departure of its chief financial officer without providing any specific reason for his exit.
Always highly volatile, Fastly shares (ticker: FSLY) got a boost in 2020 from increased traffic on the company’s network from retailers, content providers, and online gaming as consumers and businesses alike adjusted to the pandemic-related shutdown of many offline activities. But as the economy begins to emerge from widespread lockdowns, Fastly’s business appears to be slowing.
Fastly stock is plunging 24.8%, to $43.65, in recent trading. The stock has lost almost two-thirds of its value over the past two months.
For the March quarter, Fastly posted revenue of $85 million, about in line with the Wall Street analyst consensus forecast of $85.1 million and up 35% from a year ago. On a non-GAAP basis, Fastly lost 12 cents a share, a penny wider than the Street consensus estimate for a loss of 11 cents.
Yet June-quarter guidance missed Street estimates. Fastly projects revenue of $84 million to $87 million, falling short of the Wall Street analyst consensus at $91 million, with a non-GAAP loss of 16 cents to 19 cents a share, which compares with the Street consensus estimate for a loss of nine cents.
The company actually boosted its full-year revenue forecast—although it isn’t helping the stock at all. For the full year, Fastly now sees revenue ranging from $380 million to $390 million, up from a previous forecast of $375 million to $385 million. Fastly kept its previous forecast for a full-year non-GAAP per-share loss of 35 cents to 44 cents.
Fastly also said that Chief Financial Officer Adriel Lares will step down after five years in the role. The company said he will stay on to assist with a transition and that it has begun searching for a replacement. Fastly did not provide any explanation for the departure.
Citigroup analyst Tyler Radke, who has a Sell rating on the stock, trimmed his price target to $46 from $49. He writes that the company “showed continuing signs of decelerating growth,” with a June-quarter forecast that implies minimal growth from the March quarter. He finds the increased full-year revenue forecast a little puzzling. Still bearish, Radke thinks the company’s premium valuation to other content-delivery network companies will “come under pressure.”
Raymond James analyst Robert Majek, who recently downgraded Fastly shares, keeps his Market Perform rating. He contends that content-delivery network traffic trends will “remain challenged through 2021” as we move past the pandemic “and consumers head outdoors.” Adds Majek: “Given the high bar to hit the full-year guidance, we remain on the sidelines until we get better visibility and confidence around the trajectory of network traffic growth.”
Write to Eric J. Savitz at eric.savitz@barrons.com
