Fastly Downgraded by Piper Sandler on Weak Revenue Guidance

Fastly’s 'fundamentals and risks are not appropriately reflected in the stock at these levels,' says Piper Sandler.
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Fastly  (FSLY) - Get Report shares fell sharply Friday after the cloud service provider received a downgrade to underweight from neutral by Piper Sandler analyst James Fish based on the company’s weak guidance for the third quarter.

Fish slashed his share-price target to $65 from $84. Fastly recently traded at $74.01, down 6.56%, but has surged 240% year to date.

Last week, Fastly reduced its third-quarter revenue guidance to a range of $70 million to $71 million from a range of $73.5 million to $75.5 million. The guidance was lowered due to lower-than-expected demand from TikTok, its biggest customer.

Fastly stock has plunged 42% since Oct. 13. But even after that move, Fastly’s "fundamentals and risks are not appropriately reflected in the stock at these levels," Fish wrote in a commentary. “The market is still not factoring enough risk.”

As for TikTok, it is “rapidly building its own [content delivery network],” he said, according to Bloomberg. And Fastly’s organic growth is “likely to slow into the mid-20s next year,” Fish said.

After Fastly’s guidance last week, Baird analyst William Power cut his recommendation to neutral from outperform and lowered his one-year price target to $85 from $105. Stifel analyst Brad Reback also downgraded Fastly to hold from buy and lowered his one-year price target to $77 from $98.

“Due to the impacts of the uncertain geopolitical environment, usage of Fastly’s platform by its previously disclosed largest customer did not meet expectations, resulting in a corresponding significant reduction in revenue from this customer,” Fastly said in a statement.

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