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Fastly Reports Disappointing 1Q Results, Light Outlook, CFO Exit; Shares Fall 17.5%

Shares of Fastly Inc. (FSLY) tanked 17.5% in extended trading on Wednesday after reporting losses that widened in the first quarter. Furthermore, 2Q and FY21 financial outlook disappointed analysts, and the company’s Chief Financial Officer (CFO) exited the company.

The cloud-based content delivery network (CDN) company reported a non-GAAP diluted net loss per share of $0.12 versus a diluted net loss of $0.06 per share in the same quarter last year. Analysts were expecting a loss of $0.11 per share.

The company posted revenues of around $85 million, a rise of 35% year-on-year that came in ahead of consensus estimates of $84.3 million. FSLY also provided a disappointing financial outlook for 2Q and FY21.

The company expects second-quarter revenues to land between $84 million to $87 million and a non-GAAP net loss to range between $0.16 to $0.19 per share. Analysts were expecting losses to narrow to $0.09 per share on revenues of $90.8 million in 2Q.

In FY21, FSLY has forecast revenues from $380 million to $390 million and a non-GAAP net loss of between $0.35 and $0.44 per share. Consensus estimates had been for a loss of $0.40 per share on revenues of $377.7 million.

The company also announced the exit of its CFO, Adriel Lares, after five years of service. Lares will continue as CFO until FSLY finds his successor, after which Lares will remain with the company during the transition period. (See Fastly Inc stock analysis on TipRanks)

Fastly’s CEO, Joshua Bixby said, “We had another outstanding quarter, delivering revenue of nearly $85 million, up 35% year-over-year. We are observing that many of the trends that emerged last year appear to have become permanent, even as the world begins to reopen. Fastly is uniquely positioned to serve companies as they adjust to this new reality, by seamlessly combining delivery, edge computing, and security.”

Following the earnings, Oppenheimer analyst Timothy Horan lowered the price target from $110 to $85 (46.4% upside) and reiterated a Buy on the stock.

Horan noted, “1Q revenues missed our estimate by 300 bps, and the very low 2Q guidance was surprising. The silver lining is that management expects unprecedented growth in 2H21, although it will need to ramp expenses in 2Q to achieve this. Management raised FY 2021 revenue guidance…Importantly, our long-term thesis remains intact.”

“FSLY is seeing early momentum with Compute@Edge, which makes FSLY a linchpin between cloud and end users. We consider edge a large opportunity and think investing now is the right strategy. The company is capturing most of the new game-changing digital-based applications in the market,” Horan added.

The Street is sidelined with a Hold consensus rating based on 1 Buy, 4 Holds, and 1 Sell. The average analyst price target of $72.25 implies 24.4% upside potential over the next 12 months.

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