Fastly...A Lesson In Not Chasing Price
Fastly, Inc. operates an edge cloud platform for processing, serving, and securing its customer's applications that enables developers to build, secure, and deliver digital experiences at the edge of the Internet. It is a programmable platform designed for Web and application delivery.
Fastly is in the content delivery network business. A CDN works behind the scene and ensures that when you want to load up a website, it loads quickly not matter where you are in the world.
Fastly has been one of the hottest stocks in 2020. It announced that it was experiencing customer growth due to the increase of traffic on the internet as a result of social distancing measures. As a result, the company forecast revenue accelerating to between 52% and 56% for the current quarter and a 40% to 45% increase for all of 2020. But because valuation had gotten too high,
Fastly was downgraded by Bank of America, Citigroup and Piper Sandler several weeks before earnings. When price pulled back, to the daily demand zone, I went long via options.
As price continued to consolidate and volatility started to come down, my call options started to lose value. Despite several weeks until the company would announce their earnings, I got sold my call options for a $428 lost. Eventually though price did move higher and had I held onto my option, instead of being down almost 50%, that same options would of been up almost 100%.
The OG in the space is Akami. Akamai’s content delivery network (CDN) has more than 240,000 servers in over 130 countries and within more than 1,700 networks around the world. A CDN allows you and I surf the web, pay bills, watch videos faster…you get the picture. However, to put things in perspective, 85% of the world's Internet users are within a single "network hop" of an Akamai CDN server.
When Akami reported their earnings two weeks ago, both profits and revenues were higher than expected. So I thought Fastly's earnings were going to be gang fire as well. I although I already missed out in profits, I considered chasing price, but trading is about discipline and patience....I I didn't chase price.
Fastly announced earnings on 8/4.
Fastly earnings topped June-quarter analyst estimates as revenue edged by Wall Street targets. But Fastly stock tumbled on the news on Thursday as its own third-quarter revenue forecast came in just above Wall Street targets and the company disclosed that TikTok is its biggest customer.
The company disclosed that TikTok is its biggest customer and accounts for about 12% of revenue. The Trump Administration has threatened to ban the mobile video app in the U.S. because of concerns over data privacy.
Microsoft (MSFT) is in talks to buy TikTok's U.S. operations. Oppenheimer analyst Tim Horan says that may not work in Fastly's favor.
Needless to say the stock tumbled and is now back in the daily demand zone. Had I chased price, I probably would of lost most of my investment. I would of been OK with the lost because had I chased price, that would of hurt a lot more.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
