Investing.com -- Fastly (NYSE: FSLY) rose roughly 7% in pre-market trading after Oppenheimer lifted the content delivery and security platform to Outperform and set a price target of $35, citing proprietary industry checks that show accelerating contract values and early-stage monetization of agentic AI traffic.

"We are upgrading Fastly (FSLY) to Outperform and establishing a price target of $35," wrote Oppenheimer analyst Param Singh. "Our bullish stance is predicated upon our strong industry checks that indicate growing contract values (growing attach of newer security products) and early monetization of agentic AI traffic."

Singh’s checks show that Fastly’s average deal size grew in Q3 2026, driven by cross-sell of recently introduced security products. The firm’s newest offerings — AI Runtime, AI Firewall, and API Enforcement, all of which reached general availability in September 2026 — have yet to materially impact the top line, leaving what Oppenheimer views as a significant revenue ramp still ahead.

On the AI traffic front, Singh said industry conversations point to an uptick in agentic AI traffic in the third quarter, with momentum expected to build in Q4. That dynamic is translating into higher network traffic for Fastly as well as increased adoption of its bot management capabilities, according to Oppenheimer. "Although monetization is still in its early stages, we believe Fastly is positively alighted to the long-term trend," Singh noted, using language that appears verbatim in the source report.

Taken together, Oppenheimer expects these two forces, security cross-sell and agentic AI traffic, to sustain a durable growth re-rating. "We believe these trends will persist, and when combined can drive high-teens to low-20s growth for Fastly over the next few years," Singh wrote. "We believe this high growth trajectory is underappreciated at current levels and believe FSLY will re-rate as management delivers on growth and subsequent margin expansion."

For the near term, Oppenheimer expects Fastly to report Q3 2026 revenue at the high end of its $184–$190 million guidance range, implying approximately 18% growth at the midpoint. Looking further out, Singh anticipates management will modestly raise its full-year CY26 revenue guidance to 20–21% year-over-year growth, partly attributable to roughly $10 million in upside from the release of GTA VI alongside early benefits from agentic AI traffic, according to Oppenheimer’s estimates.

The valuation case is central to the upgrade thesis. Singh argues that Fastly trades at a steep discount to peers: "Fastly is currently trading at 5.2x EV/CY27 sales, which is significantly below the industry average of 10.6x for infrastructure software vendors (range of 2.3–42.3x). Given the company’s strong contract checks and agentic AI opportunity, we believe the stock should trade closer to the industry average." Oppenheimer’s $35 target is derived by applying approximately 7x EV/CY27 sales, a meaningful step up from the current 5.2x but still well below the sector median of 10.6x, leaving room for further re-rating if growth execution follows.

Original Article