To The Moon

$Fastly, Inc.(FSLY)$

Following the release of its fourth-quarter 2024 earnings on February 12, 2025, Fastly, Inc. (NYSE: FSLY) experienced a significant decline in its stock price. As of February 13, 2025, Fastly's stock price is around $7.65, representing a over -25% drop in after-hours trading following the earnings report.

Earning Overview

Fastly, Inc. (NYSE: FSLY) announced its fourth-quarter and full-year 2024 financial results on February 12, 2025. The company reported record Q4 revenue of $140.6 million, a 2% year-over-year increase. For the full year 2024, revenue reached $543.7 million, up 7% from 2023.

Q4 2024 Results: Fastly reported a larger-than-expected EPS loss of $0.03, which significantly impacted investor confidence. The company had been expected to report a much smaller loss, and the miss led to a sharp decline in stock price.

This miss indicated to investors that Fastly may be facing challenges in controlling costs and scaling toward profitability, which led to the 25% drop in stock price in after-hours trading following the earnings report.

In Q4, Fastly's revenue breakdown was as follows:

• Network Services: $110.1 million (flat year-over-year)

• Security: $26.9 million (4% increase year-over-year)

• Other: $3.6 million (63% increase year-over-year)

The company reported a GAAP net loss of $32.9 million for Q4, with a non-GAAP net loss of $3.8 million. Key metrics include 596 enterprise customers, a trailing 12-month net retention rate of 102%, and remaining performance obligations (RPO) of $244 million. Fastly also refinanced debt by raising $150 million in convertible notes.

For 2025, Fastly projects revenue between $575 million and $585 million, with a non-GAAP operating loss ranging from $15 million to $9 million.

Fundamental Analysis

Fastly is a cloud computing company that provides content delivery network (CDN) services, edge computing, and security solutions. Their services help businesses deliver content faster and securely across the internet, catering to industries like tech, media, and retail.

• Q4 2024 Revenue: $140.6 million (up 2% YoY).

• Full Year 2024 Revenue: $543.7 million (up 7% YoY).Despite the positive growth, the pace is slower than some of its peers, which raises concerns about its competitive edge in the cloud services market.

Profitability

• GAAP Net Loss (Q4 2024): $32.9 million.

• Non-GAAP Net Loss (Q4 2024): $3.8 million.

• Earnings Per Share (EPS) Loss (Q4 2024): -$0.03 (which was larger than expected and contributed to stock price decline).

After so many Year the company is still operating at a net loss, indicating it's focusing on growth and expansion rather than short-term profitability.

• Enterprise Customers (Q4 2024): 596 customers, showing a solid base of high-value clients.

• Net Retention Rate (Q4 2024): 102%. This is an impressive figure, indicating that Fastly’s existing customers are spending more on its services over time.

Guidance

• Revenue Guidance for 2025: Between $575 million and $585 million.

• Non-GAAP Operating Loss Guidance for 2025: Between $15 million and $9 million, which still signals a focus on reducing losses.

Free Cash Flow

In the fourth quarter of 2024, Fastly, Inc. (NYSE: FSLY) reported a free cash flow of $7.9 million, marking a slight decline from the $7.1 million in the previous quarter. This decrease was primarily due to increased capital expenditures, offset by improved cash from operations, reduced capitalization of internal-use software, and repayment of finance lease liabilities. For the full year 2024, Fastly's free cash flow improved by $23 million, reducing the cash burn from $59 million in 2023 to $36 million in 2024.

Looking ahead, Fastly projects a free cash flow range of negative $20 million to negative $10 million for 2025, indicating a continued focus on growth and investment.

Technical Analysis

Support Levels (Where the price tends to find buying interest):

• $7.50 - $7.52: This range has acted as a recent low, and if the stock drops below this, it could find support here. The intraday low during February 13, 2025, was $7.52.

• $7.00 - $7.10: This level is a key psychological and technical support zone. If Fastly's stock continues to fall, this area could act as a more significant support, based on previous price action.

Resistance Levels (Where the price may face selling pressure):

• $8.00 - $8.07: The intraday high of $8.07 suggests that this is the immediate resistance zone. If the stock can break above this level, it could continue to rally.

• $8.50 - $8.60: A stronger resistance level, where the stock has historically encountered selling pressure. This zone could act as the next barrier if the price rises further.

Moving Averages:

• 50-day Moving Average: It’s important to monitor the position relative to the 50-day MA to see if the stock is in an uptrend or downtrend. If the price is above it, the stock might be in a bullish phase.

• 200-day Moving Average: A longer-term indicator that might suggest overall trend direction. If the stock is below this level, it could signal a longer-term bearish outlook.

Risks and Challenges

Fastly raised $150 million in convertible notes to refinance its debt, signaling a strategic move to manage financial obligations as it looks to scale.

Despite steady revenue growth (2% YoY in Q4 2024), Fastly is still unprofitable, reporting a GAAP net loss of $32.9 million for the quarter. The company’s non-GAAP net loss of $3.8 million also indicates that it is still investing heavily in expansion rather than focusing on profitability. The non-GAAP operating loss guidance for 2025, ranging between $15 million and $9 million, shows that it may take longer for Fastly to reach profitability, which could further dampen investor enthusiasm.

Competitive Pressure: Fastly operates in a highly competitive space (edge computing and CDN services), with competitors like Cloudflare and Akamai. Investors may feel that Fastly needs to prove it can hold its ground and deliver sustainable growth amidst strong competition, which may contribute to the negative sentiment.

Valuation

Approximately $1.2 billion, reflecting the company’s current market valuation, which is low for its growth potential. Price-to-Sales Ratio: Approximately 2.2x, indicating that Fastly is valued lower than many of its high-growth technology peers, possibly due to concerns over its profitability.

Market sentiment

The market's negative reaction appears to be driven by concerns over the larger-than-expected EPS loss, despite the company's revenue growth. Investors may be apprehensive about Fastly's path to profitability and its ability to manage costs effectively.

Fastly continues to grow its revenue and customer base, showing positive long-term potential. However, it faces challenges in achieving profitability, and this is a key factor influencing investor sentiment. The company will need to demonstrate stronger cost management and a path to profitability to regain market confidence.

Conclusion

The market sentiment has shifted from optimism to concern about the company’s ability to scale without incurring deeper losses. Many analysts may be waiting for signs that Fastly is on a clear path to profitability before turning bullish again.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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