FSLY) stock, with the company’s shares down nearly 33% over the past month.” data-reactid=”12″>Concerns that the U.S. government will ban the Chinese social media app TikTok is taking its toll on Fastly (NYSE:FSLY) stock, with the company’s shares down nearly 33% over the past month.
Source: Pavel Kapysh / Shutterstock.com
Does this mean the dramatic ride in Fastly is coming to an end? Not at all. And despite President Donald Trump’s administration posing threats as part of its trade war with Beijing, FSLY stock shares offer a rare opportunity right now.
After all, it’s not every day you see a stock that’s up more than 300% on a year-to-date basis and is still trading at a discount. But, that’s where we are with Fastly right now.
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FSLY Stock at a Glance
First, let’s look at that dramatic rise. Fastly is a cloud computing service provider based in San Francisco that helps people view digital content faster. It also provides video delivery, security and edge computing services.
Fastly has acquired a healthy group of core customers that have flourished in the stay-at-home culture brought about by the novel coronavirus. People are turning to online services for commerce, entertainment and to work — and all of that helps companies like Fastly.
Second-quarter earnings included a 62% increase in revenue to $75 million. The company’s total customer count also increased from 1,837 to 1,951 in just one quarter, the biggest increase since the company’s 2019 IPO.
CEO Joshua Bixby said it’s becoming clear that the Covid-19 pandemic is causing long-lasting change to how companies operate, and Fastly is meeting that challenge:
Fastly is projecting revenue between $73.5 million and $75.5 million, with operating income that will roughly break even. The company is also forecasting a range anywhere from a $1 million loss to a $1 million profit.
For the full year, Fastly raised its guidance to a revenue range between $290 million to $300 million, from a range of $280 million to $290 million. The full-year operating loss is expected between $12 million and $2 million, better than previous full-year guidance of $20 million to $10 million in losses.
The TikTok Problem
While Fastly is increasing its business portfolio, it still gets a huge portion of its revenue from TikTok, the social media app from China that has become hugely popular as of late.
popular Vine video-sharing app that shut down last year.
acquired Musical.ly in 2017 and merged the apps’ user bases last year and has been growing ever since.
there’s an underlying reason for Trump’s ire.
less than 6,200 showed up and there were thousands of empty seats.
Whatever the reason, banning TikTok would be bad for FSLY stock. In turn, Bixby has publicly acknowledged that such a ban would be detrimental to the company and its revenue projections.
The TikTok Solution
Overall, the best solution would be for TikTok to sell its U.S. operations. Why? Because it would eliminate the threat for Trump to ban the company. And that’s what will likely happen.I
There are several top contenders.
China recently imposed new restrictions that would allow Beijing to sign off on any such deal.
according to an executive order signed by Trump.
The Bottom Line
Even when you consider national security issues — or the president’s ego — there’s too much money at play here for be to seriously believe that TikTok will be banned in the U.S. I’m much more optimistic that a deal to one of those companies will move forward before Election Day.
When that happens, Fastly stock will resume its upward trajectory. Investors considering a stake in FSLY stock are advised to move before that deal is signed.
FSLY stock is an “A” ranking in my Portfolio Grader right now.
returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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