Shares of cloud computing specialist Fastly (NYSE:FSLY) 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.
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.
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.