As coronavirus has spread across the globe, it has left financial devastation in its wake. Besides those affected directly by the contagion, millions of jobs have been lost and businesses have been forced into digital-only operation mode -- if not closed down indefinitely. Suffice it to say the pain out there is real.

As households have moved into isolation, though, some areas of the economy have grown more important than ever before. Most notably is the internet. A world that was already headed toward virtual just got a sharp shove further in that direction, and network providers of all types have been reporting sharp increases in web traffic.

Fastly (NYSE:FSLY) is included in that list. The small software-based content delivery network (CDN) reported that internet traffic in some European countries like Italy more than doubled in the month of March, and some markets in the U.S. saw surges of 40% or more. 

The company reported that, in spite of the massive wave of new data, the internet was already becoming an increasingly crowded freeway before and internet companies have been preparing. Infrastructure, as it stands right now, is still healthy.

Nevertheless, the situation demonstrates the need for a modern CDN like Fastly. While the internet is holding up, download speeds in some hard-hit countries have fallen, due to connections from home increasing in lieu of work network connections, and data-intensive video and entertainment use is also rising. In a post-COVID-19 world, Fatly's virtualized network distribution could be a long-term winner.  

Four young people standing against a wall using smartphones.

Image source: Getty Images.

A future triple-digit earner in the making?

In it's decade of existence, Fastly has been a fast-growing cloud company. In its first year since the IPO, total revenue grew 39% to $200 million -- although it's important to note that free cash flow (basic profits after cash operating and capital expenses are paid) was negative $51.4 million as the company invests for further growth.

However, that business performance came in before all things digital got a big shot in the arm due to coronavirus. Though shares are down from where they debuted as a public concern, the stock is up 3% 2020 to-date compared with a negative 14% return for the S&P 500. While that performance prices in expectation that traffic handled on Fastly's platform is set to boom this year, it does underscore the future potential for this small CDN: The potential to scoop up market share of existing web traffic and a steadily growing pie as the internet continues to increase in importance.

Know thy risk

Before piling into Fastly, though, it must be understood that this will be a volatile stock. First there's the matter of operating losses as mentioned. Though expected to moderate in 2020, management sees bottom-line red again this year. Though well-funded with $131 million in cash and short-term investments in the bank at the end of 2019, a lot is riding on this company being able to maintain its revenue momentum.  

There's also the fact that Fastly has competition. Legacy CDNs like Limelight Networks and Akamai -- which themselves have also been making cloud-computing investments to upgrade their services -- are well-established. There are other cloud-native upstarts like Cloudflare offering overlapping services. And major cloud platforms like Amazon AWS and Alphabet's Google Cloud are also increasing their presence in web distribution.

One final note is that it shouldn't be a given that Fastly's platform traffic is going to get a big bump. Some of its customers like Shopify could be in for a hit due to coronavirus as small business spending gets adversely impacted by the coronavirus shock. New customer addition Jet Blue is mostly grounded like the rest of the airline industry. While some businesses are likely increasing their use of Fastly, investors should nevertheless be ready for some disruption in the next quarter or two.

Long-term vision a must

Despite the risks, Fastly could still be a great long-term pick. It's software-based network adds flexibility for organizations looking for greater control over network data -- including edge computing applications.

In the midst of the coronavirus market crash, Fastly and other CDNs have been elite performers. The big traffic bump is nice, but investment fortunes are made over long periods of time, not in the course of a couple months. Expect this to remain a volatile small cap stock, but the possibility is there for it to grow by leaps and bounds in the years ahead. If you decide to buy, just remember to keep initial purchases small and be ready to buy more in small lots over time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.