On Thursday, Fastly Inc . (NYSE:FSLY) received a positive outlook from a DA Davidson analyst, who raised the company's price target to $24 from $22, while reiterating a Buy rating. Despite Fastly's stock experiencing a 22% drop in after-hours trading due to fourth-quarter revenue falling $2 million short of consensus expectations, the analyst remains optimistic. The shortfall was attributed to weaker international traffic, specifically from one country and one customer. The company's guidance for the calendar year 2024, although in line with consensus, was slightly lower regarding revenue and operating profit at the midpoint.
The analyst pointed out that the guidance does not anticipate a recovery in the affected traffic. However, the recent period marked the strongest addition of new logos for Fastly in three years, a sign of potential growth acceleration throughout the calendar year 2024. These results stem from Fastly's new product packaging and channel efforts, which have begun to bear fruit.
Management's confidence in growth acceleration is further supported by the company's gross margins, which have been on a steady upward trajectory. The analyst's revised price target reflects a belief in Fastly's ability to overcome the current setbacks and capitalize on its recent strategic initiatives.
The report also highlighted that Fastly's management is betting on the company's new strategies to drive growth, despite the current challenges. With the strongest new customer acquisition in three years and a continued improvement in gross margins, DA Davidson's stance on Fastly remains bullish, with expectations of accelerated growth throughout the calendar year 2024.
InvestingPro Insights
Fastly Inc. (NYSE:FSLY) has been the subject of keen interest from analysts and investors alike, especially after the recent optimism from DA Davidson. According to InvestingPro data, Fastly boasts a market capitalization of $3.08 billion, underscoring its significant presence in the tech industry. Despite concerns over profitability, with a negative P/E ratio of -19.13 as of the last twelve months leading up to Q3 2023, Fastly's performance in terms of stock price has been noteworthy. The company has seen a strong return over the last year, with a 69.72% increase, and even more impressive gains in the short term, with a 31.73% rise in the past month and a 36.23% gain over the last three months.
These figures align with an InvestingPro Tip highlighting Fastly's high return over the last year, indicating that the company's stock has been rewarding for investors despite the lack of profitability in the same period. Another critical point from InvestingPro Tips is that Fastly's liquid assets exceed its short-term obligations, suggesting a level of financial stability that could reassure investors concerned about the company's ability to meet its immediate financial commitments.
While Fastly does not pay dividends, which could be a downside for income-focused investors, the company's strong stock performance and strategic initiatives may offer growth opportunities that could appeal to those with a long-term investment horizon. For those interested in a deeper dive into Fastly's financial health and future prospects, additional InvestingPro Tips are available, totaling 9 in number, which can be accessed through the dedicated InvestingPro platform. To enrich your investment analysis, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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