Please ensure Javascript is enabled for purposes of website accessibility

Why Fastly Shares Have Been Rising Sharply

By Daniel Sparks – Updated Aug 27, 2019 at 3:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is it a matter of supply and demand?

What happened

Shares of cloud computing specialist Fastly (FSLY 2.00%) have been rising sharply over the past two trading days. Including the stock's 15% gain so far this week, the stock has soared an impressive 83% during the second half of August.

While some of the gains this month have been partly fueled by analyst optimism for the stock following an initial post-earnings sell-off, there are likely some technical factors driving more recent volatility.

A chart showing stock prices moving higher

Image source: Getty Images.

So what

Commenting on the stock's recent gains, Piper Jaffray analyst James Fish wrote in a note to investors on Monday that "a lack of available float is the culprit." In addition, the analyst cited, "upward pressure created by its largest shareholder, an overreaction to Q2 results, and a reasonable valuation," as reasons for the stock's rise.

Barron's Eric Savitz did a great job of explaining why a dwindling supply of Fastly stock could be leading to a higher price tag. Savitz noted that investment firm Abdiel has amassed a position of 3.8 million shares, or 29% of Fastly's float.

Now what

Of course, Savitz notes that the expiration of a post-IPO lockup in November could create more supply of Fastly shares. If demand at the time doesn't live up to supply, shares could come down.

Investors, however, should avoid speculation and focus on Fastly's fundamentals.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool recommends Fastly. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fastly, Inc. Stock Quote
Fastly, Inc.
$9.16 (2.00%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.