What happened

Shares of Fastly (FSLY -1.12%) fell 26% last month, according to data from S&P Global Market Intelligence. The slide came as the edge computing specialist offered disappointing guidance in its first-quarter earnings report. As you can see from the chart below, the stock fell sharply on May 6, losing 27% in a single session.

^SPX Chart

^SPX data by YCharts.

So what

Fastly had been one of the biggest winners of the pandemic, as shares jumped more than 300% in 2020. This was due to an increase in adoption of its edge computing platform, as fast web-loading speeds became crucial for many businesses during the pandemic.

A woman in a room full of computer servers.

Image source: Getty Images.

However, the Fastly growth story lost momentum this year amid a broader rotation out of growth stocks, and the company's first-quarter report sent investors fleeing. In the first quarter, it posted first-quarter revenue growth of 35% to $85 million, which included its acquisition last October of Signal Sciences.

That essentially matched estimates, but second-quarter guidance sorely disappointed investors, as Fastly called for just flat sequential growth in the second quarter, forecasting revenue of $84 million to $87 million. That was below the consensus at $91.7 million, and its bottom-line forecast also missed the mark. 

Management blamed seasonality for the weaker-than-expected guidance for the second quarter, but also said it expected growth to ramp up in the second half of the year. Additionally, its year-over-year comparisons will benefit from the loss of revenue in the second half of last year when its biggest customer, TikTok, took most of its business away, seemingly because of a threat from the Trump administration.

Now what

The good news for Fastly investors is that the stock is much cheaper than it was last October when it was trading north of $120 a share. At a price-to-sales ratio of 16, the stock is now reasonably valued. Fastly still has disruptive potential, thanks to its compute@edge platform, which offers load speeds that are up to 100 times faster than rivals.

If Fastly can deliver on its second-half guidance, the stock should gradually recover from here, especially as the long-term growth story is still intact.