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What do the Changes in Fastly’s Risk Factors Reveal?
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What do the Changes in Fastly’s Risk Factors Reveal?

Fastly Inc. (FSLY) is an edge cloud platform provider. It enables customers to deliver great digital experience to the end-user. Pinterest (PINS), GitHub, and the New York Times are among Fastly’s customers.

Let’s take a look at Fastly’s latest financial performance and changes in risk factors. (See Fastly stock charts on TipRanks).

Fastly’s Q2 Financial Results and 2021 Outlook

Revenue increased 14% year-over-year to $85.03 million in Q2 2021, but slightly missed the consensus estimate of $85.73 million. Fastly posted an adjusted loss per share of $0.15, compared to the consensus estimate of a loss per share of $0.17.

The company suffered a significant network outage during Q2 that affected its results for the quarter and full-year outlook. Fastly ended Q2 with $1.1 billion in cash and cash equivalents.

For Q3, Fastly anticipates revenue in the range of $82 million to $85 million, and adjusted loss per share in the band of $0.21 to $0.18. The consensus estimate calls for revenue of $98.02 million, and a loss per share of $0.09.

For the full-year 2021, the company lowered its revenue expectation to $340 million to $350 million from $380 million to $390 million. It revised adjusted loss per share for the year to a range of $0.65 to $0.57 from the prior range of $0.44 to $0.35. The consensus estimate calls for full-year revenue of $382.34 million, and a loss per share of $0.43.

Fastly’s Risk Factors

The new TipRanks Risk Factors tool shows 74 risk factors for Fastly. Since Q4 2020, the company has updated its risk profile with eight new risk factors.

Fastly tells investors that it has outstanding convertible notes that may dilute the ownership interest of the existing shareholders when converted. It also cautions that its stock price may decline if the shares from the converted notes are sold in the public market. Furthermore, the company says that the existence of the convertible notes may encourage shorting of its stock.

Fastly warns investors that it could default on its debt obligations. It says that servicing its debts requires substantial amounts of cash, which its business operations may not generate. If it cannot produce sufficient cash from the business to service the debt and meet capital expenditures, it may need to restructure the debt or sell some of its assets.

Fastly also cautions investors that if it suffers a cyberattack in its system, its business could experience significant adverse impact that could harm its reputation and financial results.

The majority of Fastly’s risk factors fall under the Finance and Corporate category, with 42% of the total risks. That is above the sector average of 38%. Fastly’s shares have declined about 50% since the beginning of 2021.

Analysts’ Take on Fastly

Following Fastly’s Q2 report and 2021 guidance, Raymond James analyst Frank Louthan re-initiated coverage of Fastly stock with a Hold rating without assigning it a price target.

The analyst observed that the fallout from the network outage that Fastly suffered in Q2 will delay the company’s return to growth.

Consensus among analysts is a Hold, based on six Holds and one Sell. The average Fastly price target of $36 implies 16.7% downside potential to current levels.

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