PreMarket Prep Stock Of The Day: Fastly

Earnings disasters in the growth technology sector are still coming in. The latest victim is Fastly Inc. FSLY, which is getting hammered in Thursday’s session following its fourth-quarter earnings report that was accompanied by lower guidance.

The Company: Fastly operates a content delivery network (CDN). Fastly's strategy differs from traditional CDNs, which focused on locating servers in as many locations as possible to store copies of files that consumers most use.

Fastly gears its service to the largest, most sophisticated enterprises rather than small companies and generated about two-thirds of its revenue in the United States in 2020.

February Rally: After ending January at $25.05, which was its lowest monthly close since April 2020, the issue caught a bid this month. The rally stalled at the $30 area on three different occasions and ended Wednesday’s session at $28.93.

Q4 Beat, Lower Guidance: After the close on Wednesday, Fastly reported quarterly losses of 10 cents per share, which beat the analyst consensus estimate by six cents. The company reported quarterly sales of $97.72 million, which beat the analyst consensus estimate of $92.48 million.

The company forecasts a first-quarter adjusted earnings loss between 15-13 cents a share (lower than the estimate) and sales of $92-$100 million versus a $98 million estimate.  Full-year guidance was also lower than expected.

PreMarket Prep And Early Price Action: When the issue was being covered on the show, it was trading at the $20.50 area. Co-host Dennis Dick was hesitant on the issue.

"I like the issue at $20, but history shows that when stocks fall 90%, and it is close at 85%, they rarely come back," said Dick. "This is difficult to market to try and call a bottom in, let’s see if it can hold $20.”

The hosts of the show discussed the valuation of the company. Even at this level, the company rarely makes money so it's hard to assign any value to it.

Price Action: After a much lower opening ($20.69 versus $28.93), the stock had a brief rally to $21.40 and then continued its move lower. It has continued to make new lows for the session, with the current one being at $19.46 as of 2:30 p.m. EST.

Based on the monthly charts, the next support level isn't until its April 2020 low ($17.18).

The discussion on the issue from Thursday’s show can be found here: