Fastly (FSLY) Crashes 20% on Wider Loss, CFO Departure, and Weak Guidance, 'Growth is Slowing Very Fastly' Says Analyst After Slashing PT

May 6, 2021 9:28 AM EDT
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Price: $56.96 -0.44%

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    3 Buy, 8 Hold, 2 Sell

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Fastly (NYSE: FSLY) crashed 20% in pre-open trading Thursday after the company reported weaker-than-expected guidance and earnings for the prior quarter.

FSLY posted a $50.7 million loss in the first quarter, which translates into a negative $0.44 per share. On an adjusted basis, the company lost $0.12 per share, compared to $0.06 per share.

Revenue for the quarter came in at $84.9 million to exceed the $84.3 million expected from market analysts. However, analysts were calling for a loss of $0.11 per share.

“We saw strong demand in the beginning of 2021 as we continued to bolster our edge cloud and security offerings,” Joshua Bixby, Chief Executive Officer, said.

For the ongoing quarter, FSLY is calling for a loss between $0.19 per share and $0.16 per share in sales between $84 million and $87 million. This is again worse than a loss of $0.09 per share on sales of $90.8 million in Q2 expected from the market analysts.

On a full-year basis, Fastly projects a loss ranging between $0.44 a share and $0.35 cents a share on revenue of $380 million to $390 million. The midpoint of a range is slightly better than a loss of $0.40 expected from analysts while the sales guidance also topped the market consensus of $377.7 million.

“We believe our edge cloud platform, complimented by Signal Sciences’ security offerings, provides us a tremendous market opportunity, and we will continue to invest in order to place ourselves in a position for further success,” Bixby added.

Shares were also hit by the announcement that Chief Financial Officer Adriel Lares will step down. The company is conducting an external search for its next CFO, it said.

“He was instrumental in our successful IPO, and has driven financial and operational improvements since that time as we have continued to grow rapidly. I am deeply appreciative that Adriel will remain with Fastly to help facilitate a smooth leadership transition and wish him all the best in his future endeavors,” Lares wrote in a statement.

Citi analyst Tyler Radke commented that “growth is slowing very fastly” as he maintained a “Sell/High Risk” rating and moved lower on the price target to $46.00 per share from $49.00. He expects FSLY’s premium to CDN peers to increasingly come under pressure given decelerating growth.

“Fastly showed continued signs of decelerating growth with an in-line Q1, but with weaker 2Q guidance that implies flattish Q/Q revenue growth. While customer addition metrics were relatively good, net retention rates were pressured again which suggest 2020’s drivers of strength are fading in a normalizing economy. Despite the weaker Q2 guide, annual revenue guidance was slightly raised pointing to stronger-than-normal 2H seasonality. Without clear signs of accelerating usage in Q1/Q2, it’s possible one-time items could be driving the 2H strength. The disappointing print was exacerbated by news that CFO Adriel Lares is stepping down,” the analyst said in a note.

Stifel analyst Brad Reback slashed his price target on the Hold-rated FSLY by nearly 45% to $45.00 per share to reflect the outlook and mixed earnings, as well as the CFO Lares departure.

“Following the market close on Wednesday, May 5, Fastly delivered mixed results, with a top line meet and EPS miss. Management gave flat Q/Q guidance for F2Q21, citing larger than typical seasonal headwinds coming from easing of COVID restrictions and a return to norm, leading to less content usage during the summer months. While management expects these impacts to be temporary, given the back end loaded growth expectations in the company's 2021 revenue guidance customer usage will need to follow historical seasonal patterns in order for the company to meet expectations,” Reback wrote in a memo sent to clients.



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