It's been a tough time to be a Fastly (NYSE:FSLY) investor. Ever since its biggest customer -- TikTok parent ByteDance -- ran into trouble with the U.S. government, Fastly's stock has been in freefall, losing as much as half its value. While it might have seemed like the sky was falling, recent comments by management have helped put the matter into perspective.
In this Earnings Review that aired on Fool Live on Oct. 30, Fool.com contributors Danny Vena, Daniel Sparks, and Jason Hall discuss what Fastly's management said in the quarterly shareholder letter and what all this means to investors.
Danny Vena: I was going to say the reports that came out after Fastly reported its earnings. Essentially, there were a couple of things. First of all, the CEO said that the largest customer, which we know is TikTok parent ByteDance, removed the majority of its US and international traffic from the platform in the back half of the quarter. Now, a lot of people are taking that as Fastly lost TikTok, but that's not entirely the case.
What the CEO said later on in the shareholder letter is, "We appreciate what has happened. We're prepared to accept additional traffic from this customer if conditions enable it to return." But that said, even without TikTok, TikTok only accounted for 11% of Fastly's revenue, and the stock is down more than 50% over the last three, four weeks. I would say, yeah, I agree with you, Jason, that's clearly a disconnect and I don't think investors quite understand. I suspect Fastly is due for a rebound.
Daniel Sparks: I agree.
Jason Hall: It's also a stock that's up 221% this year.
Daniel Sparks: Yeah. That's true.
Jason Hall: That's true.
Daniel Sparks: I just wanted to say one thing on that is, when you look at the guidance they provided and you back out both the acquisition, which of course makes the year-over-year growth look even worse, but then, you also back out TikTok revenue in the year ago quarter, just an estimate, we don't know exactly what that is.
But the reality is that this company is probably growing 35% year-over-year organically when you exclude some of that TikTok/ByteDance revenue from the quarter. That's just incredible growth and that's before they release edge compute, and I think edge secure is what they're calling it. There are two next big efforts, so there is an optionality too. Yeah, I think that it's a good chance to relook at this one.