Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Fastly Is Falling Even More on Friday

By Matthew Frankel, CFP® – Oct 16, 2020 at 2:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The high-flying tech company is down for a second consecutive day.

What happened

The stock market was in a positive mood Friday with the major U.S. indexes up fractionally as of mid-afternoon. But that didn't stop edge-computing platform operator Fastly (FSLY 0.90%) from getting crushed for a second consecutive day. After shedding 27% of its value on Thursday, Fastly was down by another 5.5% as of 2 p.m. EDT.

Person using laptop.

Image source: Getty Images.

So what

There was no new company-specific news about Fastly Friday -- the day's decline appears to be simply a continuation of Thursday's selling, which was fueled by a disappointing preliminary third-quarter report.

In case you missed it, Fastly now expects to report Q3 revenue in the range of $70 million to $71 million, about 5% less at the midpoint than the previous guidance range. Management cited lower usage of the platform by its largest customer (TikTok) as the main reason.

Now what

First of all, it's important to note that even the new, reduced guidance range for the recently ended quarter amounts to year-over-year revenue growth of at least 40%. So it isn't as if Fastly's growth story is coming to a halt.

Second, it's not uncommon for a share price move like this to take a few days to play out, and that's what we're likely seeing Friday. Without getting too technical, selling often triggers even more selling. It wouldn't be too much of a surprise to see Fastly decline a bit more from this point before this specific plunge is truly over.

Finally, it's important to keep Fastly's news in perspective. The company cut its guidance from 49% revenue growth to about 40%. If you don't think a reduction of that size justifies a 32% two-day plunge in the stock price, now might be your chance to add this tech stock to your portfolio.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fastly. The Motley Fool has a disclosure policy.

Stocks Mentioned

Fastly Stock Quote
Fastly
FSLY
$10.15 (0.90%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.