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Why Fastly Stock Jumped Tuesday

By Daniel Sparks – Sep 29, 2020 at 12:27PM

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Could TikTok, Fastly's largest customer, stick around in the U.S. after all?

What happened

Shares of edge computing company Fastly (FSLY -0.47%) jumped on Tuesday, rising as much as 9%. As of 12:05 p.m. EDT, however, the stock was up 6.1%.

The growth stock's gain comes as it is looking less likely that the Trump administration will be able to ban TikTok app downloads. Investors have been watching TikTok news closely, as the video-sharing app is owned by ByteDance, a Chinese company that is Fastly's biggest customer.

A woman browsing her smartphone

Image source: Getty Images.

So what

The Trump administration had planned to ban TikTok downloads in U.S. app stores earlier this month. But a judge blocked an order from the administration earlier this week by granting an injunction. 

Likely helping the stock price on Tuesday is a Politico article, which cited a federal judge, that stated TikTok app restrictions "likely exceed" President Trump's legal authority. Published Monday afternoon, the article also said that TikTok and the Trump administration's legal teams are expected to meet "no later than Wednesday" to discuss the next steps.

So what

Fastly has said TikTok's U.S. operations account for about 6% of its revenue. Though a removal of the app from U.S. app stores could negatively impact Fastly, it likely won't stop the company from growing rapidly. On average, analysts currently predict Fastly's 2020 revenue to increase 48% year over year.

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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