4 Fastly Analysts Weigh In On Q1 Earnings As Stock Plunges: 'The Challenge Remains Gross Margins'

Although Fastly Inc FSLY reported a sales beat for the first quarter, its losses were higher than Street expectations.

Morgan Stanley On Fastly: Analyst Sanjit Singh maintained an Equal-Weight rating, while reducing the price target from $25 to $18.

The first-quarter results showed “some top-line resilience,” with 21% revenue growth, and the company’s 2022 outlook was “1% ahead of consensus,” Singh wrote in a note.

“The challenge remains gross margins, which are trending lower and slowing growth in the customer base.”

Raymond James On Fastly: Analyst Frank Louthan maintained a Strong Buy rating and price target of $35 for the company.

“Our proprietary tracking tool correctly predicted Fastly’s near-term revenue growth would beat the guidance, though they did come in below our Street-high forecast,” Louthan said in a note to clients.

“We believe both the slight raise in full-year guidance along with the CEO transition announcement will be well-received by investors.”

RBC Capital Markets On Fastly: Analyst Rishi Jaluria reiterated a Sector Perform rating for the company while reducing the price target from $20 to $17.50.

“FSLY reported mixed 1Q results, generally ahead of consensus with some weakness on gross margins and 2Q revenue guide that, by our estimates, implies a 3%-4% Q/Q decline in non-Signal Sciences revenue,” Jaluria wrote in the note.

Fastly also announced the resignation of CEO Joshua Bixby, which is “a negative sign in our view especially for a company that already has a lot of work to do to regain credibility with investors,” he added.

KeyBanc Capital Markets On Fastly: Analyst Thomas Blakey reiterated a Sector Weight rating for Fastly.

Blakey expressed concerns around Fastly’s “outsized exposure to relatively lower-margin delivery revenue.”

“To be sure, Fastly has duplicative costs in COGS as it upgrades its network and is forecasting a sharp ramp in total GM of >800 bps by 4Q22 vs 1Q22 as these duplicative costs are eliminated heading into 2023. We view this ramp as promising, but await further color GM expansion levers (capacity utilization, duplicative costs, mix, etc.) from the upcoming Analyst Day May 12 in NYC,” the analyst wrote.

FSLY Price Action: Shares of Fastly were down 19.42% at $13.58 Thursday afternoon.