People should watch the video and judge for themselves after hearing her thoughts on FSLY. I sold FSLY after watching it.
I watched the video and was not impressed, it sounded like someone who does not really understand what they are talking about.
I’ve been in tech my entire career and my take is the CDN category has always been a low margin area and has a limited TAM. No matter how good the tech is you can’t increase the TAM. Yes, FSLY gets a bump from the pandemic and that may go on for a while. Long term it’s a tough road. I also believe that this is an area that the big cloud player like AWS won’t allow a third party to dominate – if FSLY tech is that good. Which remains to be seen.
We don’t need third party opinions because we can and do experience the technology every time we download a CDN delivered web page. Non professionals might not know what they are seeing but web developers quickly figure out that the CDNs are not performing well enough. This was not visible or apparent to me before the pandemic but with the increased internet traffic generated by video conferencing it is clearly visible. I’m sorry to say that TMF’s CDN provider is pretty crappy which is why we get so many misses.
This has enormous consequences for investors (if my diagnosis is correct). Fastly created a new CDN architecture that is supposedly more efficient than legacy CDNs. If that is the case and high volume internet traffic is here to stay, then there will be a lot of demand for Fastly at the expense of other CDN providers. Sooner or later they will catch on but will be beset by the “Innovator’s Dilemma.” They would have to reconfigure their networks, hardware and software, an expensive proposition that incumbents don’t like to do. But even if they do it, Fastly has a one or two year window of opportunity.
The above is only addressing the CDN part of their business. IoT needs Edge Computing which only adds to the internet traffic volume. Just what “edge” means is not set in stone. Having been in IT since 1960 I can attest that as technologies evolved (computer and communications) there has been a seesaw from core to edge and back. The current shift is from core to edge. Anything that an IoT device does on it’s own is not, in my estimation as an investor, edge but “local.” “Edge” is the internet node closest to “local.”
This battle reminds me of Apple taking over smartphones from Nokia and Blackberry. Same service, much improved user interface. Will the Nokias and Blackberrys of CDN suffer the same fate?
I have the feeling that the debate over Fastly is ignoring the IoT/Edge bull part of the story. One Fool commented that he sees no new opportunities because all the value has already been discounted by high valuations, a reference, I believe to be to the year 2000. Is 2020 a replay of 2000? I don’t think so, it’s not in the charts
S&P 500 40 year chart: https://invest.kleinnet.com/bmw1/stats40/^GSPC.html
Saul’s 200+% YTD gain is even steeper that the 1995-2000 run but it is only in a very narrow slice of the market, about a dozen or so stocks. Any of them could easily give back 50% on a bad report, a bear raid, or profit taking (which Saul confessed to ;). No growth stock is immune to that eventuality. The question is how to deal with it. My solution is to have a year’s worth spending money in cash and about 1/3 of my securities in covered call income. This way I can let the other 2/3 ride the crazy Wall Street Rollercoaster.
This morning I read some interesting news, interesting not for the human interest side but for the investing implications
The coronavirus pandemic is expanding California’s digital divide
TechCrunch - July 9, 2020
If every California student without an adequate internet connection got together and formed a state, it would contain more residents than Idaho or Hawaii.
A total of 1,529,000 K-12 students in California don’t have the connectivity required for adequate distance learning.
Analysis from Common Sense Media also revealed that students lacking adequate connection commonly lack an adequate device as well. The homework gap that separates those with strong connections from those on the wrong side of the digital divide will become a homework chasm without drastic and immediate intervention.
It’s not just business and social gatherings but the very huge education sector that is driving Internet traffic volume that the current infrastructure is having a hard time coping with. This is a huge boost for providers like Zoom and Fastly that have the better technology in place now.