Fastly stock price forecast: buy the dip after the CDN outage?

The Fastly (NYSE: FSLY) stock price is retreating in the premarket session after an outage affected most of its popular costumers. The stock closed at $50.70 on Monday and is down by more than 4% in the premarket session. 

Popular websites down

Fastly is a $5.78 billion company that many people have never heard of. Yet, millions of people interact with its services every day. The company provides Content Delivery Network (CDN) services to some of the leading companies in the world like the New York Times, Uber, Github, Twitch, and Reddit, among others. 

On Tuesday, the Fastly stock price retreated after these companies were knocked offline after an outage. A visit to some of the websites showed that they were offline. Some, like the New York Times, managed to come back online within minutes. In a statement, Fastly said that the issue had been solved.

The outage comes at a critical time for Fastly. For one, its stock has been in a deep bear market, having dropped by more than 58% from the highest level this year. Further, the company is facing substantial competition from other CDN providers like Cloudflare and Akamai Technologies. Indeed, Cloudflare stock rose by more than 0.50% in premarket trading. It has also risen by more than 28% in the past three months. 

Is Fastly stock a buy?

Fastly also released relatively underwhelming results in May. The company made $85 million in the first quarter, which was in line with Wall Street estimates. It also lost about 12 cents per share, worse than the expected $0.11. 

The company’s guidance of revenues of between $84 million and $87 million was lower than the expected $91 million. As such, after benefiting from the lockdowns, analysts and investors expect that the company will record slower growth this year. 

Analysts have mixed feelings about the company. After its recent earnings, analysts at DA Davidson lowered its target from $105 to $60. Those at Craig Hallum also lowered their target from $80 to $55 while those at Piper sandler boosted their target to $65.

While it is too early to tell, stocks tend to drop initially after major bad news and then erase some of those losses as investors reflect on the news. 

Fastly stock price analysis

The daily chart shows that the Fastly stock made a double-top pattern between October and February this year. The neckline of this pattern was at $58, which it crossed after the weak earnings. The shares also moved below the 25-day and 50-day exponential moving averages (EMA) and formed what looks like an island reversal pattern. Therefore, while the stock will bounce back in the longer term, it will likely see some weakness in the near term.

The article was updated to include the comments from Fastly.