On Thursday, Piper Sandler adjusted its outlook on Fastly Inc . (NYSE:NYSE:FSLY) shares, a global cloud platform, by increasing the price target to $8 from the previous $6 while maintaining a Neutral rating on the stock. This revision follows Fastly's third-quarter performance, which showed significant upside, driven by increased media traffic from live sports, gaming, large events, and growth among non-Top 10 customers.
For the first time since the fourth quarter of 2023, Fastly did not lower its guidance. Instead, the company carried the positive momentum from the third quarter into the fourth quarter, essentially keeping the Q4 guidance unchanged.
[This move suggests a normalized Content Delivery Network (CDN) deceleration of 3-4% quarter-over-quarter, set against a backdrop of easier comparisons from previous periods. This conservative stance for Q4 is seen as a strategy for management to regain market credibility.
Moreover, Fastly reported positive net income and was nearly breakeven in terms of earnings before interest and taxes (EBIT) and free cash flow (FCF). The outlook for 2025 now appears more promising, with better projections for both top-line growth and profitability. The company's recent performance is perceived as a positive step, signaling a potential turnaround.
The analyst highlighted that there are potential catalysts on the horizon for Fastly, including developments around Edgio, stabilization among the Top 10 customers, new product launches, and improvements in the go-to-market strategy.
These factors could lead to higher estimates in the future. Nonetheless, Piper Sandler remains cautious, opting to wait for additional signs of these catalysts materializing before changing its stance on the stock. The raised price target to $8 is based on the improved fundamentals demonstrated in the recent quarter.
In other recent news, Fastly Inc. has reported stronger-than-expected third-quarter earnings and revenue, leading to an upward revision of its full-year guidance. However, the company's fourth-quarter revenue outlook aligns with expectations, but does not anticipate the usual seasonal increase. Fastly has also revised its full-year free cash flow guidance downwards.
In response to these financial outcomes, Baird raised its price target for Fastly from $7 to $8, while maintaining a neutral rating. Citi also adjusted its price target for Fastly from $7 to $9, maintaining its neutral rating as well.
Fastly has recently reported a 7% year-over-year revenue growth, due in part to one-time events and a 20% year-over-year acceleration in revenue from customers outside its top 10. In response to this, Fastly announced a restructuring plan that will reduce its workforce by approximately 11% as part of efforts to decrease expenses and streamline operations.
The company also updated its bylaws, including new proxy rules and additional requirements for stockholders proposing nominees or business.
Analysts from various firms have adjusted their ratings and price targets for Fastly. Raymond (NS:RYMD) James downgraded the company from a Strong Buy to a Market Perform status, citing better opportunities elsewhere. DA Davidson and Piper Sandler also maintained a Neutral rating but adjusted their price targets. These are among the recent developments for Fastly.
InvestingPro Insights
Recent data from InvestingPro adds context to Piper Sandler's analysis of Fastly Inc. (NYSE:FSLY). The company's market cap stands at $1.13 billion, with a revenue of $540.87 million for the last twelve months as of Q3 2024, showing a 10.94% growth. This aligns with the analyst's observation of increased media traffic and growth among non-Top 10 customers.
InvestingPro Tips highlight that Fastly has seen a significant return over the last week, with data showing a 12.86% price total return in the past week. This recent momentum supports the positive outlook following the company's Q3 performance. Moreover, the tip indicating that Fastly operates with a moderate level of debt corroborates the company's improving financial position, as noted in the article's mention of positive net income and near-breakeven EBIT and FCF.
However, it's worth noting that according to another InvestingPro Tip, analysts do not anticipate the company will be profitable this year. This aligns with the cautious stance maintained by Piper Sandler despite the raised price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Fastly, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.