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Top-Line Growth Will Keep Fastly Stock in the Fast Lane

Louis Navellier and the InvestorPlace Research Staff

Cloud computing service provider Fastly (NYSE:FSLY) has thrived while other businesses have struggled during the novel coronavirus pandemic. Overall, the migration to digital, cloud-based ways of doing business benefited FSLY stock holders as the share price rebounded sharply from the March lows.

A magnifying glass zooms in on the Fastly (FSLY) website.
A magnifying glass zooms in on the Fastly (FSLY) website.

Source: Pavel Kapysh / Shutterstock.com

Some folks have expressed concerns, however, because FSLY stock has retreated from its high point. They’re worried that the upward momentum may be fizzling out. That said, could this be a sign that Fastly has lost its mojo?

The emotional ability to stay the course when a stock gyrates is a sign of a mature investor. Just because FSLY stock is digesting its gains doesn’t mean that it’s time to abandon this perfectly good investment.

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Moreover, after you see Fastly’s recent fiscal data, you might even be convinced to add FSLY stock to your portfolio. The share price appears to have retreated despite the company’s excellent financial results. Nonetheless, that’s what I would call a buying opportunity if I ever saw one.

FSLY Stock at a Glance

There’s just something about the $100 resistance level that’s made it impossible for the FSLY stock bulls to break through it. In July, August and early September, there were attempts to push FSLY above $100. However, all three of these attempts failed.

Will the fourth time be successful? Clearly, the bulls could make a statement by pushing FSLY stock above $100 on heavy trading volume. And if they can accomplish this before the end of 2020, that would be even better.

Furthermore, there appears to be some support at the $75 level for FSLY stock. That’s because the stock has come down to that price area a couple of times recently, but then bounced off of it. That said, just be aware that a support level’s existence is never a guarantee that the stock price won’t fall below it.

An Earnings Stunner

As businesses shifted toward cloud computing in order to accommodate remote workers, there was a buildup of anticipation surrounding Fastly’s second-quarter earnings report. Both analysts and the trading community had high expectations during the run-up to the quarterly earnings announcement.

Taking an objective look at the results, it’s evident that Fastly had an absolutely outstanding quarter. For one thing, the company posted second-quarter revenues of $75 million, a 62% year-over-year improvement. This result underscored Fastly’s robust top-line growth.

Moreover, Fastly’s total customer count increased from 1,837 in the first quarter of 2020 to 1,951 in the second quarter. This represented the fastest quarterly growth in total customer count since Fastly’s initial public offering.

Additionally, Fastly’s average enterprise customer spent roughly $716,000 during the second quarter. That’s a significant improvement over the $642,000 recorded in the prior quarter.


Odd Reaction

With all of that in mind, it shouldn’t be too shocking that Fastly raised its full-year fiscal guidance for 2020. Yet, among FSLY stock traders, there was a surprising reaction to all of the aforementioned positive data.

As InvestorPlace contributor William White reported, FSLY stock tumbled nearly 11% after the company released its quarterly financial data.

“That’s despite its adjusted earnings per share of 2 cents beating out Wall Street’s estimate for a loss of 1 cent per share. Its revenue of $74.66 million also comes in above analysts’ estimate of $71.4 million,” commented White.

The disconnect between the data and the market’s response seems irrational, to say the least. And with its updated guidance, Fastly expects to post $290 million to $300 million in revenues for 2020. By all indications, the company will have a strong finish to a tremendous year.

The Takeaway

As informed investors, it’s best to follow the actual data, not other traders’ perceptions and reactions. And in the case of FSLY stock, the data is highly encouraging and suggestive of a great year for the company and its shareholders.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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