Fastly’s (NYSE:FSLY) pre-earnings run-up proved that speculators made the wrong bet. The stock fell 33% last week, erasing October’s rally and bringing the stock back to the $80 - $100 trading range.
Fastly’s valuations are nowhere near a level of safety that is sustainable. Bears have a 10.2% short position and will benefit after the guidance cut.
Fastly forecast revenue will total $70 to $71 million. It previously expected revenue of up to $75.5 million. By falling short a mere $4 million, markets reacted violently for a good reason. The forward growth is not gaining momentum. Instead, CEO Joshua Bixby said, "The current global environment has in some ways fueled our business, but has also created areas of uncertainty."
Markets hate uncertainties the most and are punishing the stock. Chances are good that if the momentum investors who bought the stock ahead of the earnings report close their position, Fastly could lose half its value. The stock’s 200-day simple moving average is above $55. Technical chartists call that the support price.
Your Takeaway
Fastly’s monthly drop brings the stock back to nowhere but the selling momentum is now building. If the technology sector sells off again as it did in September, investors will sell Fastly stock, too.
