Analyst Tal Liani of Bank of America predicts that Fastly (NYSE: FSLY), an edge computing business, would see its share price increase to $18. Given the current stock price below $13, this price goal indicates a potential 43% increase in the next 12 months or so.
Keep in mind that Liani's once-bright outlook has dimmed somewhat. The stock's prior price target from the analyst was $28.
Although growth is slow, Fastly is making great strides. The BofA analyst justified the sustained buy rating and significantly higher price target for Fastly based on the company's performance over the last year. In 2023, the business saw a 17% increase in sales, a marked improvement in gross margin, and a significant decrease in net losses.
A major issue is that compared to the overall edge computing market and its main rival, Cloudflare (NYSE: NET), Fastly's growth rate is significantly lower. Cloudflare is constantly innovating and adding new products to its network, which could cause Fastly to fall behind.
Even if the company's comeback may be rocky, Liani is aware that Fastly is facing certain challenges. To account for the possibility that Fastly's performance may fall short in the first half of the year, the analyst reduced estimates.
Invest in Fastly stock? The growth potential and value of the company make Fastly stock a challenging sell, even though the BofA analyst is still positive about the stock—but with less excitement.
In 2024, Fastly anticipates a price-to-sales ratio of about 3 and revenue of $580 million to $590 million. Free cash flow for the year was negative, indicating that the business was not profitable
Even though Fastly's price-to-sales ratio is very cheap compared to other cloud stocks, the company's projected 15% revenue growth in 2024 is not very remarkable. Cloudflare anticipates a 27% increase in sales this year, its larger competitor. The analyst at BofA may still have overestimated the potential of this edge computing firm, Fastly, because of Cloudflare's dominance.
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