What happened
Shares of Fastly (FSLY 4.43%) are down 18% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence, following a worrisome note from investment firm Raymond James.
So what
The cloud computing services stock had already started this week by drifting lower along with the broader market. But its sell-off accelerated with a 13.6% decline on Thursday alone after Raymond James analyst Frank Louthan curiously reiterated their strong buy rating despite simultaneously warning that Fastly's third-quarter revenue could be lower than expected when the company reports on Nov. 1, 2023.
More specifically, Louthan lowered his Q3 revenue projection for the company to $124.2 million from $126.8 million previously, citing data from the firm's proprietary tools implying light internet traffic trends that will likely have a negative impact on Fastly's sales for the month. He also reduced his full-year revenue expectation by around $3 million to $506.5 million.
Now what
Nonetheless, Louthan added that while Fastly's valuation remains high at an enterprise-value-to-revenue ratio of 4.5X, he believes its longer-term traffic growth "will continue to garner the Street's attention, especially with recent execution and the appointment of a new CEO."
Indeed, even after its recent pullback, Fastly has nearly doubled year to date as of this writing thanks to its strong operating performance since appointing its new CEO, Todd Nightingale, to the helm late last year. Assuming it can continue executing well in the coming quarters, I agree there's no reason the stock price won't continue to respond in kind.
