Fastly Analysts Have More Questions Than Answers Amid Q3 Warning

Analysts are out with their reaction to Fastly Inc's FSLY preliminary third-quarter earnings and the subsequent 30% drop in share price.

Credit Suisse analyst Brad Zelnick maintains an Outperform rating on Fastly and lowers his price target from $110 to $100.

Raymond James analyst Robert Majek maintains an Outperform rating on Fastly.

More Questions Than Answers: Zelnick believes Fastly left investors and analysts with “more questions than answers.”

Fastly said its largest customer, TikTok, provided less revenue than expected in guidance. The company also disclosed other customers had lower usage in the quarter.

“Who are the few other customers that disappointed?” Zelnick asked in a note. He also wants to know how the lower revenue and impact from TikTok will impact profitability when full results are released.

Majek believes the question over the other customers is “more concerning" than TikTok results being lower. 

Related Link: Jim Cramer’s Take On Stimulus Talks, Earnings, Fastly’s Stock Drop

What’s Next: Majek believes the “stock will remain under pressure until we get some more clarity around these items," but remains bullish on the company.

“We haven’t lost any confidence in Fastly’s level of performance and product differentiation," he wrote in a note.

Zelnick would like to hear more details about the ByteDance/TikTok relationship with Fastly. In the second quarter, ByteDance represented 13% of Fastly revenue.

Zelnick wonders if ByteDance “preemptively look (ed) for an international provider."

Benzinga’s Take: Both of these analysts have a lot of questions on Fastly, but are not downgrading the stock.

TikTok is the largest customer but made up 13% in the second quarter. The pressure will be put on shares before Oct. 28, the day Fastly releases official third-quarter earnings.

Shares are up over 500% in 2020, but today's drop could be an overreaction. 

Shares of Fastly closed down 27% at $89.37.