Shares of the San Francisco company at last check were 6.8% higher at $104.15. The stock is trading at more than nine times its 52-week low of $10.63, set in mid-March. It's also off 24% from its 52-week high of $136.50, set in mid-October.
Analyst Timothy Horan said in a note to investors that he had downgraded Fastly in August over concern about tougher 2021 earnings comparisons and the loss of revenue from the short-video app TikTok,
Horan said, however, that he has grown "incrementally positive" after channel checks suggested record traffic volumes and a positive launch of Fastly's compute@edge.
Edge computing is a distributed computing program paradigm that brings computation and data storage closer to the location where they're needed to improve response times and save bandwidth, Wikipedia explains.
"Covid-19 lockdowns are likely to stay with us until mid-2021, and even when these have lifted, consumer behavior has shifted to cheaper/better e-commerce and [over-the-top] streaming," Horan said.
The analyst said enterprises are more quickly moving operations to the cloud, and edge is now being incorporated.
"We consider edge the future of cloud, and while it's now less than 2% of cloud revenue, it could grow to over 10% in five years in a very large market," he said.
Consensus estimates call for Fastly to deliver about $82 million in revenue for the fourth quarter, at the midpoint of guidance. Horan said he was at the high end of guidance and consensus at $83.7 million.
Channel checks point to record internet traffic in the fourth quarter, Horan said, driven by e-commerce and video and game streaming. Security is also seeing very strong growth, he added.
"Although Fastly, long one of our top picks, was up 335% in 2020," Horan said, "it has underperformed its peers and is relatively inexpensive.
"It has the potential as a neutral supplier of edge compute to dominate this niche, given that developers have flocked to its platform."