What happened
Shares of beleaguered internet infrastructure company Fastly (FSLY 21.83%) were up 2.2% today as of 11:30 a.m. ET. That compares to a 1.8% decline for the Nasdaq Composite Index. Fastly popped higher on Friday as well, as rumors were floated that Fastly could be a takeover target by Google-parent Alphabet (GOOGL 0.41%)(GOOG 0.20%).
Image source: Getty Images.
So what
Google recently announced it will be acquiring cybersecurity outfit Mandiant (MNDT +0.00%) and adding it to its Google Cloud segment. Doing something similar with Fastly would make sense, too. Fastly's tech infrastructure helps its customers manage web content and data traffic. And after getting clobbered for well over a year now (the stock is down nearly 90% from all-time highs), Fastly has an enterprise value of just $2.59 billion. That's chump change for Google.
Of course, this is just speculation. It's been rumored before that Fastly was a takeover target by other large tech companies, but nothing ever transpired. Nevertheless, the stock is rising anyway as traders weigh the possibility of an acquisition again.
Now what
Personally, I think the probability of Fastly being acquired is higher than ever before. The market has lost faith in this former tech darling, and Fastly's financial trajectory has simultaneously slowed and sunk deeper into the red. Revenue growth was 22% in 2021 (compared to 45% in 2020), but adjusted operating losses increased to $55 million (compared to an adjusted operating loss of $17 million in 2020). However, the tech platform could be incredibly valuable if plugged into a larger internet ecosystem, like the one Google operates.
For long-term investors, though, rumors like this should be discounted until a firm offer is made. In the meantime, look for Fastly's first-quarter 2022 earnings update on May 4 for more details on the company's progress.
