The Ratings Game: Fastly’s stock is on pace for its biggest percentage gain since 2020, as analysts cite overhaul under new CEO

by | Feb 13, 2023 | Stock Market

Shares of Fastly Inc. were on pace for their biggest percentage gain in nearly three years, after BofA analysts on Monday upgraded the stock and said that turnaround efforts under the cloud-software provider’s new chief executive could make the company profitable next year. The analysts double-upgraded Fastly
to buy from their version of sell and hiked their price target to $16 from $10.50. Shares rocketed 30.7% higher, to 12.90, on Monday, putting the stock on pace for its biggest percentage increase since May 7, 2020, when it rose 45.68%.

“We are positive on the implications of the turnaround efforts and managerial changes and note low expectations and poor investor sentiments, which could be a positive for the stock if the turnaround efforts succeed,” the analysts said in a research note on Monday. The call from the analysts comes as wariness surrounds the tech industry, where layoffs have become more common and customers have grown more cautious about spending amid recession fears. Shares of Fastly, like those of its bigger cloud rivals Alphabet Inc.
and Inc.
have fallen over the past year as the pandemic-era digital boom fades. Fastly runs a content-delivery network intended to help online content load more quickly via so-called edge cloud services, which are located closer to end users. Its new chief executive, Todd Nightingale, a veteran of Cisco Systems Inc.
took the helm in September. The company had announced it would look for a new chief executive after reporting a bigger-than-expected loss in May. In the company’s third-quarter earnings, Nightingale outlined a new strategy under which Fastly would expand more into security, cut costs, change pricing and invest more in edge computing. Security products, the BofA analysts said, made up only 13% of Fastly’s sales, and those were higher-margin products. And they said Fastly was moving billing for its core content-delivery network segment to a new model that charges customers a set monthly amount, with overage charges. …

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