Will the Fourth Be With Fastly Stock?

FSLY is down 55% year-to-date

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Cloud computing company Fastly, Inc. (NYSE:FSLY) steps into the earnings confessional after the market closes on Wednesday, May 4. After a 33% post-earnings bear gap back in February, will the fourth be with Fastly this Wednesday?

Fastly stock has a history of outsized post-earnings moves; six of the last eight post-earnings reactions have been by 10% or more, regardless of direction. The options market is pricing in a 27% move for Wednesday's trading, much higher than the average post-earnings move of 19.6% Fastly has clocked in the last two years.

Fastly stock is down 55% in 2022, and remains only slightly off its March 15 annual bottom of $13.01. The shares haven't toppled $20 since that February gap lower, and are down 75% in the last 12 months.

From a fundamental point of view, Fastly stock continues to trade at a rich valuation when considering the company’s growth rate and lack of profitability. Fastly stock currently trades at a price-sales ratio of 5.21 and is estimated to grow revenues by 14.9% for fiscal 2022, as well as increase revenues another 17.2% for fiscal 2023. Moreover, for fiscal 2021 FSLY reported $354.3 million in revenues. This signaled 22% revenue growth and indicated an expected slowdown in their top line growth rate. Fastly also reported $222.7 million in net losses for fiscal 2022, which was roughly a $126.8 million decrease on the bottom line. In addition, FSLY holds a relatively weak balance sheet with $527.86 million in cash and $1.05 billion in total debt, which could further affect their ability to expand the business and will likely delay their profitability.

Investors taking a flier on Fastly should note the security's Schaeffer's Volatility Scorecard (SVS) rating sits at 98 out of 100. This suggests the stock has exceeded these volatility expectations during the past year -- a boon for premium buyers.


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