Fastly (NYSE:FSLY) appears to be revolutionizing internet content delivery. Moreover, it has already landed multiple rapidly growing companies as customers, and I believe that it can successfully move into new, related sectors. As a I result, I believe that FSLY stock is worth buying at this point, despite its huge gains in recent months and its extremely high valuation.
Fastly appears to have revolutionized content delivery networks, or CDNs, by making them easier for developers to utilize. Specifically, Fastly says that it allows developers who work for internet websites to analyze more data than competing CDNs. As a result, developers who use Fastly can “better monitor application performance” and solve problems that arise more easily, DataCenterNews reported.
According to a tech publication called TrustRadius, Fastly excels at quickly publishing content that other CDNs have difficulty launching in a short time. Fastly also offers “support for many types of media, including video” and “makes serving and manipulating images very simple.” TrustRadius added, however, that “Fastly is not the best choice for very small companies and very small deployments, and it does not have the ease of implementation into large cloud … [platform-as-a-service] vendors like AWS or Azure.” But the website contended that “for the use case that it was designed for, Fastly is best-in-class.”
Another website, stackshare, claims that Fastly is the “fastest CDN,” the “best CDN” and has “powerful API.” Application programming interface, or API, facilitates “the creation of applications” and is obviously extremely important in the tech world now. Fastly also offers “real-time updates” and “image processing on demand,” according to stackshare.
Finally, Spotify (NYSE:SPOT) indicated that Fastly offers “faster performance, access to metrics, and logging of delivery [of content],” as well as “a system that … [is] easy … to maintain.” Spotify added that it was able to use Fastly’s “customizable edge computing language, Varnish Configuration Language” to accomplish a number of functions. Among these functions were saving content for later, fast use in an “intelligent” way and targeting content to users based on their individual characteristics.
Spotify was also able to use Fastly’s API to enable any of its programmers to easily make changes to the CDN. And utilizing Fastly’s system, Spotify was able to ensure that all changes are automatically sent to CDN programmers for their approval. Spotify reported that it was able to use Fastly to create “a simple workflow with a degree of automation.”
Other Big Customers and Potential Expansion Into New Areas
In addition to Spotify, Fastly has multiple other large, quickly growing customers. Among the companies in the latter category are Shopify (NYSE:SHOP), Wayfair (NYSE:W) and Microsoft’s (NASDAQ:MSFT) GitHub. Further, multiple internet publishers, which are likely doing pretty well during the pandemic, are using Fastly. Among the names in that category are BuzzFeed, Vox Media, Wired and wikiHow.
Using its ability to make programming and monitoring IT systems exceptionally easy and quick, Fastly will, I believe, be able to move into new, even more lucrative areas like cloud infrastructure, customer relationship management and general IT management. Ultimately, I believe that it will compete very successfully with companies like ServiceNow (NYSE:NOW), Microsoft and Salesforce (NYSE:CRM).
The Bottom Line on FSLY Stock
In the last three months, Fastly has soared 375% and it’s up nearly 400% so far this year. But the company’s market cap is still just around $10 billion. I believe that its revenue is likely to grow exponentially as consumption of internet content grows tremendously and as it uses its superior programming tools to gain share in new sectors, propelling its shares higher.
Moreover, the trailing price-sales ratio of FSLY stock is 38. That’s quite high, but it’s actually in the same ballpark as a number of other firms whose outlook, in my opinion, is not nearly as bright as Fastly. Among the companies in the latter category are Bill.com (NYSE:BILL), with a P/S ratio of 52, Shopify (32), and The Trade Desk (NASDAQ:TTD) (30.4).
I believe that Fastly, along with other companies that are benefiting from people staying at home more, could pull back 10%-20% when a vaccine for the novel coronavirus is introduced. But, given Fastly’s tremendous success, its huge potential and the fact that many investors probably still haven’t heard of it, its shares will probably climb much more than 10%-20% between now and the point at which a vaccine is introduced. As a result, investors should buy FSLY stock now.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he owned shares of Fastly.