The shares of Fastly purportedly received the boost following bullish comments from the analyst.
The shares of Fastly Inc (NYSE: FSLY), an American cloud computing services provider, are on the bounce following an upgrade of its stock by an analyst from Oppenheimer Holdings Inc (NYSE: OPY). As reported by The Street, the analyst, Timothy Horan revised his position on Fastly from Perform to Outperform, citing the uptick in the firm’s traffic sources as confirmed by his firm’s channel.
Horan also justified his upgrade citing the successful launch of Fastly’s compute@edge service and set a $125 price target for the shares. The analyst downgraded the firm’s shares to $108 back in August over concerns of strained revenues on the backdrop of pulled traffic from ByteDance, the firm’s single largest customer.
Fastly has had a plunge in its traffic as ByteDance was embroiled with the authorities during the Trump administration over national security concerns. The company that operates the short video creation app, TikTok survived a ban in the United States but only after Oracle Corporation (NYSE: ORCL), and Walmart Inc (NYSE: WMT) agreed to take ownership stakes in a restructured ByteDance.
Amidst this brawl, TikTok pulled his traffic from Fastly who provides it with its content delivery service in the third quarter of 2020, and the latter firm cringed from the cut in revenue. Per a Bloomberg report at the time, the firm confirmed that the traffic plunge is connected to the regulatory concerns ByteDance was facing.
“Based on publicly available information, we believe this global traffic reduction was in response to the potential of a prohibition of US companies being able to work with this customer,” Fastly noted in a note to its shareholders.
Based on Horan’s upgrade, Fastly shares closed Thursday’s session up 6.75% to $104.13 and has continued its rally in the pre-market where it has added an additional 0.43%.
Fastly Shares Got Boost on Horan’s Comments
The shares of Fastly purportedly received the boost following bullish comments from the analyst. He noted that Fastly’s business may continue to get a boost even after the COVID-19 lockdowns are lifted as users are not so engrossed in cloud computing offerings.
“Covid-19 lockdowns are likely to stay with us until mid-2021, and even when these have lifted, consumer behavior has shifted to cheaper/better e-commerce and [over-the-top] streaming,” Horan said Per The Street report.
Horan also weighed in on the massive difference in valuation between Fastly and its peers in the edge and cloud computing niche including Cloudflare Inc (NYSE: NET).
“An important part of our bull thesis is that FSLY should trade at par with Cloudflare, and for a moment this summer it traded at a premium, but recently FSLY has massively underperformed its peer group,” Horan noted.
While the source of the recent traffic that prompted the Oppenheimer upgrade was not defined, there are expectations that the Biden Administration may turn affairs in the favor of ByteDance and business may return back to normal for both Fastly and TikTok alike.
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