Please ensure Javascript is enabled for purposes of website accessibility

Why Fastly and Cloudflare Shares Jumped Today (and Akamai Ticked Higher)

By Daniel Sparks – Sep 1, 2021 at 2:22PM

Key Points

  • The three tech stocks' gains on Wednesday likely have more to do with an upbeat day for the overall market.
  • This new feature from Apple could lead to millions of dollars of incremental annual revenue for content delivery networks.

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

Could this new Apple feature benefit these three content delivery networks?

What happened

Shares of content delivery network (CDN) providers Fastly (FSLY -4.32%), Cloudflare (NET -1.58%), and Akamai Technologies (AKAM -1.01%) were all trading higher Wednesday. Fastly and Cloudflare in particular had jumped sharply, up 7% and 6%, respectively, as of 1:10 p.m. EDT; Akamai was up about 1% as of this writing.

The tech stocks were likely up for two main reasons: a bullish day in the overall market (particularly for tech stocks) and a note from a Piper Sandler analyst saying a new security feature from Apple (AAPL -0.34%) could benefit CDN specialists Fastly, Cloudflare, and Akamai.

A chart showing two stocks rising amid high trading volume.

Image source: Getty Images.

So what

When Apple unveiled iOS 15 earlier this year, the iPhone maker said the new operating system will include a security feature called iCloud Private Relay, making it available to users with iCloud subscriptions.

"Private Relay protects users' web browsing in Safari, DNS resolution queries, and insecure http app traffic," Apple says on its website about the feature that will debut with iOS 15. "Internet connections set up through Private Relay use anonymous IP addresses that map to the region a user is in, without divulging the user's exact location or identity."

With a "dual hop" architecture likely to involve content delivery networks (CDNs) like Fastly, Cloudflare, and Akamai, Piper Sandler analyst James Fish estimates the feature creates an incremental annual opportunity for CDNs of approximately $40 million to $74 million over the next five years. 

Also helping the three stocks on Wednesday seems to be an upbeat day in the stock market, especially for tech stocks. Highlighting the market's optimism, the tech-heavy Nasdaq Composite was up 0.7% as of this writing. And many tech growth stocks were up even more sharply.

Now what

Fastly's gain today adds to its momentum in recent weeks as it rebounds from year-to-date lows around $35. But the edge computing specialist's shares are still notably down 47% year to date. The company's revenue growth slowed significantly in the second quarter as it lapped tough comparisons and suffered a brief outage that hurt revenue. But revenue will likely reaccelerate over time thanks to easier comparisons, recent acquisitions, and a track record of strong dollar-based net expansion rates (a measure of increasing spend from existing customers). 

Akamai, which is a slower-growing company than Fastly, has similarly seen a slowdown as it laps tough comparisons from 2020. But management remains optimistic about its long-term opportunity, noting in its second-quarter earnings call that its customers are turning to it "more than ever to power and protect exceptional online experiences."

Cloudflare isn't having any trouble lapping its year-ago comps. Revenue grew 53% year over year, and management's guidance suggests there's more strong growth ahead.

Daniel Sparks owns shares of Apple. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Apple, Cloudflare, Inc., and Fastly. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Fastly Stock Quote
Fastly
FSLY
$9.52 (-4.32%) $0.43
Apple Stock Quote
Apple
AAPL
$142.16 (-0.34%) $0.49
Akamai Technologies Stock Quote
Akamai Technologies
AKAM
$89.02 (-1.01%) $0.91
Cloudflare Stock Quote
Cloudflare
NET
$48.42 (-1.58%) $0.78

*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.