Fastly (FSLY) Falls as Guidance Disappoints, but Revenue and Earnings Top Estimates Leading to Higher PTs

February 18, 2021 8:57 AM EST
Get Alerts FSLY Hot Sheet
Price: $70.03 -1.38%

Rating Summary:
    5 Buy, 5 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 17 | Down: 13 | New: 41
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Fastly (NYSE: FSLY) shares fell 8% early Thursday despite fourth-quarter results that topped market estimates for earnings and revenue. Investors pointed to disappointing guidance for the weakness. However, analysts were more bullish, with price targets raised at several firms.

The company recorded a loss of $0.40 per share with an adjusted loss was sitting at $0.09 per share. Revenue came in at $82.6 million from $58.9 million. Surveyed analysts were expecting an adjusted loss of $0.11 per share on revenue of $82 million.

“We had a strong finish to 2020, delivering total full year revenue of $291 million, up 45% year-over-year,” said Joshua Bixby, CEO of Fastly.

“As we continue to execute on our vision of providing a complete edge cloud solution, we look forward to continuing to empower developers and builders as the digital transformation continues to accelerate. The demand for a modern, fast platform that is secure, scalable, and high-performing is top-of-mind for every organization. We’re excited to further our momentum to meet that need.”

However, the company missed on guidance as it expects to lose between $0.09 per share and $0.13 per share. The midpoint of negative $0.11 per share was worse than the negative $0.09 expected from the Street.

Fastly is looking to generate between $83 million and $86 million in revenue, with the midpoint coming in slightly below $84.6 million.

In separate news, FSLY also presented Brett Shirk as the company's new Chief Revenue Officer (CRO).

Stifel analyst Brad Reback raised the price target on the Hold-rated FSLY to $80.00 per share from the prior $68.00.

“Fastly closed-out a roller coaster FY20 with a healthy print as revenue modestly exceeded expectations on strong Signal Science contribution (~$7.5M), solid new customer adds and continued moderating growth (~27% YoY vs 42% last quarter) within the core customer base as new customer additions have yet to close the TikTok gap.

“On the profit front the addition of Signal Science helped drive gross margin into the low 60% range with the potential for upside overtime as the overall business scales. Looking forward, we estimate that management is guiding to a mid-20% organic growth for FY21 (~32% for the combined business) as the company laps the tough-to-beat, pandemic-driven FY20 quarters. That said, total organic growth has the opportunity to potentially outperform our FY22 ~25% revenue growth estimate on easing comps and greater Compute@Edge adoption,” the analyst said in a note sent to clients.

Robert Majek, an analyst at Raymond James, maintained the “Outperform” rating on Fastly and bumped the PT to $95.00 from the prior $85.00. However, he also said that the company faces challenges in 2021.

“Post the earnings call, investors were most focused on parsing management's F21 revenue outlook. Our best guess is that $380MM (31% YoY) of revenue implies a high ~$30M contribution from Signal Sciences and core Fastly growth of ~20%+ YoY, which likely dampens near-term enthusiasm for those that value the stock on a NTM revenue growth basis. For those willing to look out further, we remind investors that F21 will be a depressed revenue growth rate year before core revenue re-accelerates in F22 given the tough y/y comp against a COVID-fueled 2020, diminished TikTok business which we estimate creates a 7pt drag on core 2021 revenue,” Majek wrote in today’s note.

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