What happened

Shares of Fastly (FSLY -0.65%) were climbing Tuesday as the edge-computing specialist rode a broader rebound in the high-growth tech sector, and as one analyst said the stock's post-earnings sell-off was overdone.

As a result, shares were up by 8.9% as of 1:44 p.m. EDT.

The Fastly logo on a red background

Image source: Fastly.

So what

After tech stocks broadly plunged Monday on inflation concerns and then opened Tuesday morning down sharply, the sector rebounded as investors took advantage of discounted prices.

Fastly shares tumbled last week after its second-quarter guidance was weaker than the market had been hoping for.

DA Davidson analyst Rishi Jaluria lowered his price target on the stock from $105 to $60, but maintained a buy rating on it. He acknowledged that slowing growth in Q1 and guidance calling for sequentially flat results in Q2 was disappointing, but in spite of that, he said that Fastly's share price decline had gone too far.

While that was hardly a ringing endorsement for Fastly, it seemed to be enough to push the stock higher along with the broader shift in market sentiment. After all, Jaluria's price target still predicts a roughly 33% upside for the stock.

Now what

Fastly's first-quarter report sparked a wave of doubts among investors, with slowing organic growth and guidance that was below expectations. However, Fastly raised its guidance for all of 2021. Management indicated that the second quarter should be the trough in its growth rate due to a difficult comparison to Q2 2020. Also, the second quarter is normally a seasonally slow one for the company.

Given that, traders may have overreacted last week when they sent Fastly's shares down by 27% on the heels of the report. It now trades at a price-to-sales ratio of less than 15. While that isn't cheap, it is a much lower ratio than it was trading at just a few months ago, and a decent valuation for a company that still has disruptive potential.