Fastly Rises 69% in a Month: Should You Buy, Sell or Hold the Stock?

Fastly’s FSLY shares have surged 68.8% in the past month, outperforming the broader Zacks Computer & Technology sector’s 5.8% return and the Zacks Internet - Software industry’s 7.9% growth.FSLY’s shares have also beat industry peers like Reddit RDDT, Blend Labs BLND and Gitlab GTLB.During the same period, shares of Reddit and Blend Labs have gained 23.1% and 1.4%, respectively, while GitLab stock has lost 2.9%.FSLY’s robust stock price performance has been driven by its impressive third-quarter 2024 results. Revenues grew 7% year over year to $137.2 million, beating guidance. Network Services revenues rose 5% to $107.4 million, security revenues increased 12% to $26.2 million and emerging products, led by compute, surged 85% to $3.6 million.Fastly, Inc. Price and Consensus Fastly, Inc. price-consensus-chart | Fastly, Inc. QuoteProduct Innovation and Development Aid FSLY’s ProspectsFastly upgraded its Next-Gen WAF by making it faster to activate, improving detection capabilities and adding detailed data insights, like country and IP information, for better security management.FSLY enhanced its Bot Management system with new analysis tools, giving customers better visibility and control over their bot management costs. The update also allows customers to personalize bot challenges by adding logos, improving both security and user experience.Fastly integrated its Support Portal to the single sign-on experience, allowing customers to easily navigate between the Fastly Control Panel, Next-Gen WAF Console and Support Portal with a seamless login process, improving efficiency and user convenience.Fastly has launched its adaptive DDoS protection, which automatically shields against Layer 7 and other application-level DDoS attacks. The solution can be easily activated with just a click, ensuring quick and hassle-free implementation for customers.Expanding Customer and Partner Base Drives FSLY’s GrowthIn the third quarter, Fastly's packaging efforts saw strong growth, with the number of packages sold more than doubling compared with last year. The new logo packages tripled, making up 43% of all packages sold, up from 16% last year, highlighting strong momentum in packaging efforts.New deal registrations grew 33% year over year in the third quarter, while year-to-date bookings increased 46% from the same period last year, highlighting strong sales momentum.Cineverse selected Fastly's Media Video Delivery solution to enhance its digital cinema and streaming capabilities. Additionally, Connected Television Group chose Fastly's CDN and Support services to strengthen its video distribution solutions. These deals showcase Fastly's growing presence in the media and entertainment sector.Fastly's enterprise customer count grew 5% year over year in the third quarter of 2024, reaching 576 compared with 547 last year. However, a sequential decline of 25% raises potential concerns about sustaining growth in its enterprise customer base.Declining Top Customer Revenue Challenges FSLY GrowthRevenues from Fastly's top 10 customers fell 11% year over year in the third quarter of 2024, partially offset by 20% year-over-year growth in revenues from customers outside the top 10. In the reported quarter, the top 10 customers accounted for 33% of revenues, down from 40% in the third quarter of 2023.Fastly's trailing 12-month net retention rate (NRR) was 105%, down from 110% in the prior quarter and 114% a year ago quarter. This decline is mainly due to reduced revenues from some of the company's largest customers.Fastly anticipates that this trend will continue to affect its NRR through the rest of 2024, posing a challenge to its overall growth.FSLY’s Earnings Estimate Reflects UncertaintyFor the fourth quarter of 2024, Fastly expects revenues to be in the range of $136 - $140 million and a non-GAAP loss of 2 cents per share ($0.02) to non-GAAP earnings of 2 cents per share.The Zacks Consensus Estimate for revenues is pegged at $138.75 million, indicating year-over-year growth of 0.70%. The consensus mark for earnings is pegged at the breakeven point.For 2024, FSLY projects revenues to be between $539 million and $543 million. The Zacks Consensus Estimate for revenues is pegged at $541.85 million, indicating year-over-year growth of 7.09%.Non-GAAP earnings fall within a loss range of 12-8 cents per share. The consensus mark for 2024 earnings is pegged at a loss of 10 cents per share, indicating an improvement from the year-ago quarter's loss of 17 cents per share.Zacks RankFastly currently carries a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. 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