What happened
Shares of edge computing specialist Fastly (FSLY +3.90%) jumped on Tuesday, rising as much as 10%. As of 2:45 p.m. EDT, the stock was up 7%.
The growth stock's gain comes as shares continue to rebound from a pullback earlier this month. The sharp sell-off in early August was driven by concerns about a disclosure from Fastly management, stating that a meaningful portion of its revenue was coming from social network TikTok. President Donald Trump threatened to ban TikTok, which is owned by a Chinese company, from the U.S. if it does not find a U.S.-owned acquirer for its U.S. operations.
Image source: Getty Images.
So what
After rising to an all-time high of $117.79 in the first few days of August, the stock fell following Fastly's second-quarter update. Though the edge computing specialist's revenue and bottom line for the period were both better than analysts were expecting, many investors were spooked by a disclosure from management about Fastly's reliance on TikTok.
"So over the last six months, [TikTok] represents just about 12% of revenue, trailing six months ending June 30. Less than 50% of that is in the U.S," said Fastly CEO Joshua Bixby on the company's second-quarter earnings call. "We continue to monitor the situation closely, obviously."
However, as investors further digest this news, they seem to be convinced that the market's initial gut reaction to sell off shares so sharply was overdone. Shares have been steadily rising over the last two weeks, climbing from levels in the seventies to above $90 per share.
Now what
While ongoing developments with TikTok are likely a primary focus for many Fastly investors right now, investors should note that the company isn't reliant on TikTok to continue growing rapidly. Fastly's total customer count increased from 1,837 to 1,951 between the first and second quarters of 2020. This was Fastly's largest sequential customer growth ever. Further, given the company's impressive customer list on its website, many of Fastly's largest enterprise customers are likely fast-growing technology companies.
