Why Fastly Stock Was Flailing on Friday

Pundits following the company continued to get more bearish on its prospects.

Hardly for the first time in recent days, edge computing company Fastly (FSLY -3.53%) was socked with an analyst price target cut on Friday. Although this probably didn’t come as an overwhelming surprise to market participants, they nevertheless didn’t like it. The stock traded down by 3.5% during a session in which the S&P 500 index was well in positive territory with a 1.3% increase.

New day, new price target cut

Friday’s cutter was Morgan Stanley prognosticator Sanjit Singh, who reduced his Fastly price target by a fairly steep 40%. He now feels it is worth $12 per share, where previously he estimated its fair value at $20. He maintained his equalweight — hold, in other words — buy on the stock as he did so.

Singh’s move came two days after the company posted its first-quarter results. While it managed to grow its revenue by 14% year over year and narrow its net loss — topping the average analyst estimates for both — investors found its guidance wanting. The company’s full-year forecast ranges for both revenue and per-share earnings came in below the consensus pundit projections.

This has made professional Fastly followers more bearish on the company’s future. Prior to Singh’s price target reduction, Bank of America downgraded the stock very aggressively, knocking it down two pegs from buy to sell and cutting its price target by 56%.

Losing patience

Investors in tech stocks accept that their companies will post losses as they work to build scale with their products and services. But Fastly keeps posting bottom-line losses, which at times have been heavy. That weak guidance baked into the first-quarter earnings didn’t help either. This is a company with an increasingly impatient investor base that wants to see better results.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Fastly. The Motley Fool has a disclosure policy.

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