Fastly Earnings: Atrocious Outlook on Weakness With Major Customers Creates Grave Concerns

Fastly’s first quarter was fine, but its bleak second-quarter outlook, big cut to full-year guidance, and the reasoning behind the weakness creates concern that Fastly is at a competitive disadvantage that will seriously weigh on performance. At the very least, we expect the firm’s long-term growth rate to come down materially. We are cutting our fair value estimate to $10 from $20 because of a three-point percentage cut to our average annual sales growth projections over the next 10 years and a slower ramp to profitability to reflect less projected operating leverage. Our Very High Uncertainty and no-moat ratings are unchanged, so we don’t see the stock as particularly attractive despite a 30% decline in after-hours trading.