Fastly Downgraded by Raymond James, Identifies Better Opportunities Elsewhere

Fastly has received a downgrade from Strong Buy to Market Perform by analysts at Raymond James. In their note to investors, the analysts highlighted that the stock’s recent recovery leaves limited upside, suggesting that better investment opportunities exist elsewhere.

Raymond James pointed out that shares have rebounded and are nearing their previous price target of $8. They expressed that more attractive prospects lie in the data center sector and larger telecommunications carriers.

Throughout the year, Fastly has been attempting to revitalize its business by broadening its product range. While the analysts recognize the potential for these new initiatives, they warned that it may take more time for the company to show significant improvements in its revenue and free cash flow (FCF).

As a result, a less aggressive rating was considered more suitable. Furthermore, the sale of StackPath and the recent bankruptcy reorganization of a competitor might present new opportunities for Fastly. However, the immediate effects of these developments are uncertain and could potentially favor multiple providers, not just Fastly.

Despite maintaining their estimates for 2024 and 2025, Raymond James has removed its price target for the stock. Currently, Fastly’s valuation stands at approximately 2x its estimated 2025 enterprise value-to-revenue, in contrast to peer Akamai, which is valued at 4x.

Raymond James justified this valuation discount, noting that Fastly is still in a free cash flow negative position and remains heavily dependent on delivery services, which have encountered weaker trends as of late.