Why I added to Fastly in the premarket

Investment Analysis Clubs Saul’s Investing Discussions
1

Why I added to Fastly in the premarket without understanding anything about the tech involved.

  1. I got alerts about the acquisition from my broker and from Seeking Alpha in my email when I signed in.

  2. I read comments on the board.

  3. I learned that the acquired company was highest rated by Gardner in whatever it does. It got a 5.0 out of 5.0, while Cloudflare got 4.4 (not bad, but not the same).

  4. I learned that this company was fastest growing in whatever it does.

  5. Fastly was going to use it as a key part of its new security offering.

  6. And then the key words: the acquisition would be ACCRETIVE to revenue growth rate and margins.

What more could I ask for? I looked in the premarket and the price was basically still unchanged because some poor fool had left an overnight order to sell a huge 25,000 shares at $89.85 which apparently was holding the price down. I bought a reasonable amount at that same price, sold a little ZM and CRWD (which were both about 24.5% positions) to cover. Next time I looked, when I returned from a doctor’s appt, Fastly was up 10%. I wish I had been able to add more.

Best,

Saul

98 Likes
2

I guess living in California puts me at a disadvantage for pre-market trading. Getting up for a 6:30am market opening is plenty of challenge for me - getting up at 5:30am or so is what Kathy Griffen has labeled “the butt crack of dawn.”

I was lucky enough, though, to buy some FSLY below $80 a couple weeks ago on Tik-Tok weakness.

5 Likes
3

Hi Saul

Absolutely!

On point 6, not only does Signal Sciences have a higher revenue growth rate but margins at 85%. This will both accelerate Fastly’s revenue growth and improve their margins (which had been lagging some other of our stocks).

We were also worried how Fastly would grow their Enterprise customer base, with a slowdown of new wins from Q1 to Q2. Well here’s another 60 customers to add to Fastly’s 310 Enterprise customers right here! (Or at least a portion will be Enterprise, grow into Enterprise).

Then consider the potential synergies and cross-selling between the companies that could ensue. Fastly also has a more rounded proposition to go after new business with, and Cloudflare loses a competitive advantage here perhaps.

The potential is there. These are top quality customers. But perhaps most meaningfully of all was Smorgasbord’s interpretation that Social Sciences’ DNA and vision is aligned to Fastly’s - and perhaps it is this that bodes most promisingly for the success of this acquisition.

Just some thoughts.

5 Likes
4

Well here’s another 60 customers to add to Fastly’s 310 Enterprise customers right here! (Or at least a portion will be Enterprise, grow into Enterprise).

Hi Thinking, The little asterisk said those 60 were already $100,000 (Enterprise) customers, and 70%, or over 40, were new to Fastly.

Saul

10 Likes
5

Saul - I am far, far, far from any sort of tech expert, but here is how I understand Fastly’s tech in a very simple way:

Think about the master, mainframe Netflix server located at one central spot in the world. Now think about the millions of people trying to access that server all over the world, all at different times throughout the day. If all those millions of users had to be routed through this single, master server, from wildly different geographical distances from this server, there would never be enough bandwidth for all of us to enjoy HD or 4K streaming we demand. To solve this, many clusters of servers are placed in different geographic regions between the viewer and the master, mainframe Netflix server, and those clusters of servers are spread across the entire world. So now, Netflix only needs to communicate with say, a dozen cluster servers, instead of a million, individual users. This keeps things running beautifully.

Another benefit here, is that these clusters of servers provide protection to the master, mainframe Netflix server from cyber attacks. These clusters can serve as an end-points, where the virus cannot proceed to the next level (in this case, the main Netflix server). (more on this later)

What I have described above is known as an “edge” network, or Content Delivery Network (CDN).

Now, here is how Fastly comes into play…imagine having the ability to better program those clusters to share resources with other clusters! Lets take the same Netflix example above, and look at it differently:

Through programming, these clusters also have the ability to flex bandwidth where it is necessary to ensure optimum viewing. For example, between the hours of 1am - 6am in America, the need for Netflix is theoretically at its lowest point. This allows for the cluster of servers to send all that unused bandwidth to places all over the world where users are viewing Netflix during primetime hours, say 7pm - 10pm.

Also, lets just say that to watch Netflix in India, you might traditionally have to go through servers that are located in Spain. But suddenly the Spain clusters go down. Programmable clusters recognize the outage, and can flex and re-route themselves to send the data around Spain’s downed servers to another cluster of servers that are working perfectly, and then onward to India.

So clearly these servers are talking to each other .

Now, using the security example above, imagine if one cluster server that was solely focused on delivering Netflix suddenly decided to talk to a Crowdstrike cluster server. Instant Crowdstrike protection for Netflix!

I’ll stop here, but imagine the possibilities this could lead to.

(Note: I learned all this from Muji of course…https://hhhypergrowth.com/what-are-edge-networks/)

Brandon

44 Likes