After falling as low as $10.63 in March, Fastly (NYSE:FSLY) soared when it posted Q1 beating estimates and raised its outlook for the year. Why are investors so bullish on Fastly? The company has three positive catalysts. It beat on earnings, exceeded revenue expectations, and raised its guidance.
Fastly posted internet usage grew by 38%. Its customer count grew modestly to 297, up from 288 the quarter before. Still, Fastly lost $12 million on a GAAP basis ($7 million loss non-GAAP).
Outlook
For Q2/2020, Fastly forecast a break-even (non-GAAP) in operating loss. It now sees a non-GAAP operating loss of between $10 - $20 million, an improvement from the ($43) to ($33) million loss. The company is positioned to scale its business by expanding its global network this year. Capital expenditures of 13% to 14% is unchanged from 2018.
Importantly, the COVID impact to the business may prove permanent. The forced work-from-home helped its business. But it is forcing businesses to digitally transform quickly. The company said that "you can't digitally transform quickly when you actually can't control or work with your system, where you have you know huge amounts of pro-serve that have to go into that, whereas a system built by developers for developers, we are uniquely positioned to capture that inspiration and to serve the best of the web."
In the short-term, Fastly is positioned to accelerate growth. Look for the company to demonstrate that sustained pace before adding to Fastly stock.
