Stifel: Fastly Poised For 30% Topline Growth

Fastly Inc FSLY has a growing addressable market and is focusing on driving strong new customer additions as well as forming partnerships to support its future growth, according to Stifel.

The Analyst

Brad Reback initiated coverage of Fastly with a Buy rating and $25 price target.

The Thesis

Fastly has gradually built functionality around edge applications and edge security; the company believes it's gaining developer mindshare “as the solution effectively addresses customers' edge computing, content delivery and streaming, cloud security and application delivery controller needs,” Reback said in the Tuesday initiation note. (See his track record here.) 

Taking these market segments collectively, IDC estimates a total addressable market opportunity of $14.7 billion in 2018 and predicts a four-year CAGR of 15.2 percent to reach $25.8 billion by 2022, the analyst said. 

Fastly has plans to increase its sales and marketing expenses through the rest of 2019 to add new customers, while also driving healthy expansion rates among its existing customer base, Reback said. The latter is crucial to the company's long-term success, since its enterprise customers have been contributing more than 80 percent of quarterly revenue, he said. 

Fastly can support future growth by boosting its partner ecosystem and expanding its international presence, the analyst said.

Stifel expects Fastly to sustain at least 30-percent top-line growth given the large market opportunity at home and opportunities in the international markets. 

The cloud company’s profitability can improve going forward as its technology platform gains scale and management drives additional operational efficiencies, Reback said. 

Price Action

Fastly shares were down by 2.84 percent at $22.20 at the time of publication Tuesday. 

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Photo courtesy of Fastly.