Fastly Inc. (FSLY-N)

It had the best internet technology to host clients. But business faded and they suffered a bad outage. Shares are down 75% from the peak. Can it be taken over?

Forget "risk-off" trading. Rather, IPOs of 2020 came in way too hot and got burned; Covid stocks like Docusign are hammered; Chinese stocks are a train wreck; cryptos hit; specific retailers hit by supply shortages; and then there are cloud-based stocks trading at sky-high price-to-sale multiples. He's a fan of this group, but at ridiculous valuations. The cloud isn't dead, though. Inflation erodes the future value of these stocks. Also, these stocks are speculative, which tend to trade as a group; investors sell first and ask questions later. A few bad earnings can crush the entire group, like Twilio and Docusign. Salesforce actually reported strong results though a weak forecast. As a group, the cloud stock were down 33% on average, in a bear market. WIX and Fastly down the most, but are both good companies offering fine services. The cloud stocks peaked a long time ago, like Jan-Feb, like Zoom. Only 13 out of 50 of these stocks trade at less than 100x earnings! Ones with a lower valuation have done better than the higher ones during this rout. Even now, there's still expensive on a valuation basis.

(A Top Pick Aug 19/20, Down 43%) He got stopped out. They report tonight. He's pretty sure that revenue growth may be slowing. Look for net revenue retention, gross margins, and capex.

They blew it. Outages in that industry are causing pullbacks [there was an outage in June caused by a software bug]. Doesn't like Fastly.

He left it because they had too many issues over who their customers, and tonight they lost their CFO and reported a bad quarter. He expects more downgrades tomorrow. Wished he had better news.

A super expensive company. It had a decent, but not great quarter, and most of that rise was due to TikTok. FSLY is making a bottom. This is not a take-out candidate, no.

A super expensive company. It had a decent, but not great quarter, and most of that rise was due to TikTok. FSLY is making a bottom. This is not a take-out candidate, no.

A content delivery network. Is up 239% in the past 6 months, but lost 10% this week. It reported two weeks revenue weakness because their biggest customer is TikTok has been mired in Trump interference. This has been red hot during Covid.

Cloud space has really exploded. But look at ones that are already producing money. Over time, revenue growth will come to this name. Can own, but put a stop loss on it. Relatively oversold, could be a trade. Lot of risk in the name. For more timid investors try CLOU, a diverse mix of cloud companies.

It was once a hot stock. After hours today it lost 25% of its value. It's a next-generation content deliverer, the best in class. So, what happened? It's frothy, surging this month on no news or catalyst. The company warned on its Q3 revenue after today's close; its biggest customer TikTok's usage of Fastly did not meet expectations which slammed revenues, so the stocked pulled back. (Trump hates TikTok and this was a factor.). But this sell-off has gone too far. It's now a buying opportunity. In July, the stock rose too high and the target price fell. Fastly may very well sell off tomorrow or a few more days before it rebounds. History shows that is often rebounds. Buy it in the $70s.