By Michael Elkins
Bank of America upgraded Fastly, Inc. (NYSE:FSLY) to a Buy rating (From Underperform) and raised their price target on the stock to $16.00 (from $10.50) as BofA analysts believe that the cloud computing provider is on "the road to recovery."
They believe that the company's short-term results could still fluctuate but would like to focus on the potential value creation in the intermediate term and believe that Fastly has solid underlying foundations, which the new management team is aiming to expose.
Todd Nightingale joined Fastly as CEO in September and laid out a turnaround strategy during the company's 3Q earnings call. Since then, he has taken steps to streamline the product portfolio, pricing, and other operational aspects, and Bank of America believes this could drive revenue growth reacceleration and margin expansion, with the company reaching profitability by 2024.
BofA analysts wrote in a note, "At the core of our positive view on the company, we highlight two key arguments. First, we believe new management is focusing on the right areas and believe in the new management capabilities in driving a change. In his short tenure at Fastly, CEO Nightingale brought new key executives in product, technology, sales and people operations positions and we believe the new leadership is geared around the core strengths of the company. Second, and more importantly, we believe Fastly has unique and differentiated asset, and the right efforts could drive an effective way to address the challenges of a commoditizing Content Delivery Networking (CDN) world. For example, the ability for fast purge (quick update), low latency, network of high-end servers, and other technical attributes, suggest Fastly could crystalize its product differentiation and focus on higher margin businesses. These capabilities could also help the company to create unique security and Edge Compute services, which would translate to growth acceleration over the next few quarters."
Shares of FSLY are up 9.02% in pre-market trading on Monday.