Fastly Receives Multiple Downgrades on Hefty Valuation

Fastly’s price-to-sales ratio totals a stratospheric 45.25, and its price-to-book ratio is an astronomical 41.4, according to Morningstar.
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Fastly  (FSLY) - Get Report shares fell Friday, interrupting a 400% flight for the content delivery network’s stock year to date, as analysts turned cautious.

At least four analysts have cut their ratings this month, viewing the stock’s surge as overdone, Bloomberg reported. Fastly’s price-to-sales ratio totals a stratospheric 45.25, and its price-to-book ratio is an astronomical 41.4, according to Morningstar.

The company has benefited from increased internet usage amid the coronavirus pandemic.

Fastly’s valuation is “difficult to justify,” and “bakes in near-perfect execution,” Bank of America analysts wrote in a commentary Friday cited by Bloomberg.

The Bank of America analysts lowered their rating to underperform from buy, although they’re still “constructive on the fundamentals.”

To be sure, they lifted their share-price target to $90 from $50 to account for the stock’s recent ascent.

On Thursday, Citigroup dropped its rating to sell from neutral, saying Fastly’s revenue needs much “heavy lifting” to maintain the stock’s valuation.

On Monday, Piper Sandler dropped its rating to neutral from overweight, but lifted its price target to $89 from $31, just like Bank of America.

Piper Sandler analyst James Fish said that although the company should be a "major beneficiary" of accelerating e-commerce, streaming, and edge computing, “euphoria” now surrounds the company. It “has a lot to prove near-term at these levels,” he said.

Bloomberg calculated that Fastly has six buy ratings, three holds, and two sells.

Fastly shares recently traded at $98.22, down 4.38%. The stock has jumped 375% in the past three months, compared to 29% for the Nasdaq Composite.