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$FSLY jumped ~21%+ after its earnings call on Wednesday after hours.
The stock has been a poor investment, down ~4% compared to its IPO price. But there is a reverse in the direction with a 45% jump in the last three months.
Is the stock on its way to the all-time high of $100+ or beyond? Let's find out!
Unexpected Stuff From Earnings Report
Based on Coatue's Rule 200, FSLY still needs to be in better shape.
Revenue growth + Gross margin + Operating margin + 12M Retention
> 20% + 52.3% - 40% + 116% = 148%
-- > Negative operating margin is a drag, while revenue growth is not as fast as it used to be:
Note: Coatue uses Rule 200 for fintech. I use it for all SaaS/Subscription stocks.
The company added several new executives. We need to see how they perform in the upcoming quarters.
Score: Fair to Good -- need to see faster growth for such as small company (only $123M in quarterly revenue).
Fastly's Bottom Line
Score: Fair -- directionally moving toward profitability.
Fastly's Balance Sheet
~ $400M+ cash & cash equivalent
vs. ~$470M+ in total debt
Some debt concerns. But there is good news:
FSLY uses cash to buy its long-term debt at a discount to par value and saves on overall expenses.
Score: Fair -- watch for debt reduction.
Fastly's Free Cash Flow
Turned positive Free Cash Flow, thanks to positive operating cash flow, which in turn is the result of smaller operating loss.
Score: Fair -- Good direction and monitoring for expansion.
Fastly's Valuation Feasibility
P/S of 4.5X, much smaller than peers.
To grow sales by 4.5X:
Score: Fair to Good -- watch for earnings and rev growth.
Is Fastly (FSLY) A Buy Now?
The company's fundamentals are getting stronger.
The stock price could be a fair buying opportunity.
I own it and plan to hold it.
Do your research: https://stockcard.io/FSLY