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Why Fastly Stock Plummeted Today

By Daniel Sparks – Sep 3, 2020 at 4:26PM

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The edge-computing specialist's shares are taking a breather, along with many other growth stocks.

What happened

Shares of edge-computing company Fastly (FSLY 0.56%) were slammed on Thursday, declining more than 11% by the time the market closed.

The stock's decline comes amid a sharp decline in the overall market on Thursday, particularly among growth stocks like Fastly.

A chart of a stock price with a falling white arrow.

Image source: Getty Images.

So what

Highlighting bearishness in the overall market today, the S&P 500 closed the trading day down 3.5%. The tech-heavy Nasdaq fell 5%. Even more, many technology growth stocks like Fastly were down 6% or more, weighing on the overall market.

Growth stocks have surged higher in 2020. When the coronavirus pandemic showed how resilient many of these companies were, the market began piling into these stocks, driving their valuations higher. But investors seem to be doing some profit-taking after such a sharp run-up.

Fastly was among the stocks that performed extremely well during the coronavirus pandemic. Not only did its shares soar, but its revenue growth also accelerated significantly in Q2 and management guided for third-quarter revenue to increase approximately 50% year over year. 

Now what

During the second half of 2020, investors will be watching to see how much of Fastly's momentum can be sustained as the economy starts to reopen. Some of the company's growth has been fueled by increased internet usage from people sheltering at home. Management, however, said in the company's second-quarter earnings release that it remained confident in the underlying growth potential of its business in Q3 and beyond.

Daniel Sparks owns shares of Fastly. The Motley Fool owns shares of and recommends Fastly. The Motley Fool has a disclosure policy.

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