On Monday, Oppenheimer upgraded shares of Fastly Inc . (NYSE:FSLY) from Perform to Outperform, setting a price target of $12.00. The upgrade is based on the expectation that Fastly will gain from the bankruptcy of Edgio, a former competitor in the content delivery network (CDN) industry. The analyst predicts that Fastly could capture approximately $40 million in revenue as a result of Edgio's exit from the market.
According to InvestingPro data, Fastly has shown strong momentum with impressive returns over the last three months, though 10 analysts have recently revised their earnings expectations downward for the upcoming period.
The positive outlook for Fastly is further supported by recent improvements in internet volumes and pricing. The consolidation of the CDN market from six players to three within the last 15 months is also seen as a beneficial development for the company.
Fastly, recognized as a premium provider in the industry, is expected to leverage this reduced competition to its advantage. The company's revenue grew by nearly 11% in the last twelve months, reaching $541 million, demonstrating its ability to capture market share.
Furthermore, the company is anticipated to experience strong demand for its edge compute and security products. This demand is driven by emerging artificial intelligence applications, which are becoming increasingly important across various sectors.
Fastly's product offerings in these areas are expected to contribute to its growth and performance in the market. InvestingPro analysis suggests the stock is currently undervalued, with strong financial health indicators including a healthy current ratio of 3.97 and moderate debt levels.
It is important to note that over 75% of Fastly's revenue is derived from its CDN services. The industry's recent consolidation is likely to have a significant impact on Fastly's business, positioning it well within a more competitive landscape.
The analyst's revised estimates for Fastly's financial performance reflect these industry dynamics. With a gross profit margin of nearly 55% and projected revenue growth of 7% for FY2024, Fastly shows promising operational efficiency despite current market challenges.
In summary, the upgrade by Oppenheimer reflects a positive outlook for Fastly's business, considering the recent industry changes and the company's potential to capitalize on new opportunities in edge computing and security, as well as the expected increase in CDN-related revenues.
The $12 price target represents the firm's confidence in Fastly's ability to outperform in the current market environment. For deeper insights into Fastly's valuation and growth prospects, including exclusive financial metrics and analyst forecasts, visit InvestingPro for the comprehensive Pro Research Report.
In other recent news, Fastly, Inc. announced its third-quarter earnings for 2024, providing insights into its financial performance and future prospects. The earnings call, led by CEO Todd Nightingale and CFO Ron Kisling, offered forward-looking statements about Fastly's expected business performance and future financial results.
The leadership expressed optimism about the company's strategy and long-term growth, while acknowledging potential risks that could affect future financial results.
Fastly's forward-looking statements indicated confidence in the company's product sales and overall future prospects. However, the company also outlined uncertainties that could potentially impact its performance.
The earnings call, which included a Q&A session, was webcasted on Fastly's website and will be archived for one year, with a replay available by dialing 800-770-2030 with the conference ID 7543239. These recent developments provide a glimpse into Fastly's financial trajectory and strategic plans for the future.
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