Fastly Earnings: Growth Trends Look Good, and Hiccup in Margin Improvement Should Resolve

No-moat Fastly continued to see momentum in its business in the third quarter, with the solid execution extending this year’s trend. Margins have improved dramatically but backtracked a bit this quarter. Usage costs that caused the hiccup should prove temporary, and we expect margin expansion to be back on track by 2024. The after-hours pop in the stock seems excessive, as results were at the top end of guidance and management essentially maintained full-year guidance while raising the midpoints. Nonetheless, the move does bring Fastly closer to where we believe it’s fairly valued after the recent selloff. We’re maintaining our $20 fair value estimate, as nothing in the quarter changes our outlook.