On Thursday, Fastly Inc . (NYSE: NYSE:FSLY) experienced a change in stock rating as a Craig-Hallum analyst moved the company's status from Buy to Hold, adjusting the price target to $20.00. The downgrade comes in the wake of Fastly's reported earnings, which fell short of expectations despite an additional $2.8M in one-time revenue. The company's guidance for the first quarter of 2024 was also described as weak, although projections for annual revenue met market expectations and profitability forecasts surpassed them, suggesting a potential increase in revenue later in the year.
The analyst highlighted several concerns, including limited explanations for the observed weaknesses, particularly international softness, and a lack of detail on the factors expected to drive growth in the second half of 2024. Additionally, the reported Remaining Performance Obligations (RPO) were notably weak, and the company is finding it more challenging to expand its Gross Margin than previously anticipated in 2023.
The firm had previously upgraded Fastly's stock in February 2023, based on the belief that the business had reached its lowest point. Since then, Fastly had shown steady progress, with its stock appreciating to 5.7 times its revenues. However, the recent quarterly results have raised concerns, prompting a more cautious stance from the analyst. The decision to downgrade reflects a wait-and-see approach, with the analyst opting to look for a more attractive risk/reward scenario before adopting a more bullish position.
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