On Thursday, RBC Capital adjusted its outlook on Fastly Inc . (NYSE:FSLY), reducing the price target to $9 from the previous $18, while keeping a Sector Perform rating on the shares. The decision follows Fastly's report of another quarter that did not meet expectations, which resulted in the company's shares plunging by 31% in after-hours trading.
Fastly's first-quarter revenue exhibited a year-over-year growth of 14%, aligning with expectations. However, the company's forecast for the second quarter suggests a slower growth rate of 7% year-over-year, significantly trailing behind the consensus estimates. The company also revised its full-year guidance downwards by $25 million, or 4.3%, which implies an expected acceleration in the second half of the year that the market has yet to be convinced of.
The company's performance has been impacted by reduced network traffic from its large customers, which has overshadowed its efforts in product innovation and market diversification. Despite initiatives around new product offerings and packaging, these strategies have not yet produced the anticipated results.
RBC Capital's commentary noted that while Fastly's stock is currently facing challenges, the risk-reward profile remains balanced, especially after the after-hours decline. The firm highlighted that the lowered revenue guidance for the upcoming quarter and the full year indicates a cautious stance on the company's near-term prospects.
Fastly's recent performance and subsequent guidance update have led to a reevaluation of its stock by analysts. The revised price target reflects the current market sentiment and the company's efforts to navigate through a period of slower growth.
InvestingPro Insights
In light of RBC Capital's revised outlook on Fastly Inc. (NYSE:FSLY), it's pertinent to consider additional insights from InvestingPro. Firstly, Fastly is not expected to be profitable this year, as analysts have indicated, which aligns with the company's recent performance woes. Despite this, Fastly's liquid assets do exceed short-term obligations, providing some financial stability in the short term. Moreover, the company operates with a moderate level of debt, which may offer some flexibility as it attempts to pivot and improve its financial trajectory.
From a valuation perspective, Fastly's market capitalization stands at $1.77 billion, reflecting the impact of recent market movements. The revenue growth for the last twelve months as of Q1 2024 was 16.53%, indicating some positive momentum despite the challenges faced. However, the price of Fastly's stock has fallen significantly over the last three months, by 42.74%, which may present a potential entry point for investors who believe in the company's long-term strategy and market position.
For those considering an investment in Fastly, there are additional InvestingPro Tips available that could provide a deeper understanding of the company's financial health and future prospects. To gain further insights and make well-informed decisions, interested investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. There are currently 4 more InvestingPro Tips available for Fastly, which could be invaluable for assessing the company's potential.
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