I’m worn out with trying to warn people about Fastly. It’s really discouraging.
People are still talking about Fastly’s “30% drop” from their highs. Right now, at the current pre-market price of $76.70, Fastly is down 44% from its high.
The market doesn’t reward “good tech”. I have no question they have good tech. The market rewards good businesses, not good tech. This is a company that hasn’t figured out how to sign up more than a minuscule number of new customers per quarter.
We talk so much on the board about not falling in love with a stock, and admitting when something is wrong, and getting out. You can always get back in if it’s warranted. To put it in perspective, I started exiting at $94.50. To get back just to there from here would require a 23% rise in the stock.
Today’s drop seems to be due to a Piper Sandler analyst downgrade. While I don’t usually get excited about analyst remarks, here’s what the analyst said so that you can see why his remarks affected Fastly,:
• Piper Sandler is now downgrading Fastly from Neutral to Underweight with analyst James Fish saying that “the market is still not factoring enough risk.”
• Fish thinks “fundamentals and risks are not appropriately reflected in the stock at these levels.”
• The analyst notes that TikTok is building its own content delivery network and estimates Fastly’s organic growth is “likely to slow into the mid-20s next year” with tough comps ahead in H1.
• Piper Sanlder cuts its Fastly target from $84 to $65.
I didn’t even think of their organic growth dropping into the mid 20’s next year due to the tough comparisons in the first half of the year without the usage surge, and without TikTok.
I think the analyst was being generous with a $65 target.
Those still in Fastly are “hoping” for a turnaround, but as it has been pointed out by so many people, turnarounds sometimes work, but it is rare. And even in the rare case where it occurs, the opportunity cost of tied up money for a year or more can be enormous.
A link to the Knowledgebase for this board is in the Announcements panel that is on the right side of every page on this board.
For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”