Let me start this post with one famous quote from Warren Buffet.
“Fearful when others are greedy, and greedy when others are fearful.”
Some might say I am crazy for even looking at Fastly (FSLY) after it’s been beaten down over 90% from it’s all time high but you have to look at their fundamentals, growth prospect and risk/reward so before you completely dismiss my thesis, take a look.
Fact 1: aggressive hiring
Go to their career site. Over 100 jobs posted. Many in Engineering and not as much in Sales. This usually in an indication that they don’t have problem (or not that big of a problem) in demand generation. And another indication that they think their relationship is strong with their clients that they can cross-sell or get deeper into a relationship with all their products and services. Hence, they are continuing to hire.
Fact 2: leadership change
Yes, in May, they announced that Joshua Bixby is leaving. He has been with the company since 2017 (based on my recollection) and became their CEO in 2020. It’s such a short tenure. But when you have so many outage problems and continue to miss earnings, then you need to go. While some might think this is a negative for Fastly, Raymond James analyst Frank G. Louthan think there might be a good upside when the new CEO is appointed.
Fact 3: an acquisition target
In April, rumors were circulating that Alphabet might acquire Fastly. If you have ever worked for a startup or a growing company, they are constantly approached by people for M&A or even JV reasons. But not this many. In December, Cisco was rumored to acquire them. What does this indicate? Bad and good. They are burning cash since their FCF is negative. So either, they have to raise cash by possibly issuing more stocks (bad for current shareholders) or be acquired (which I believe is what they have been looking into).
So we are a buyer at this level. What should you do? Do your own DD before making any investment but definitely take the time to look into this beaten down stock.
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