Fastly Stock Falls Quickly 24% on Disappointing TikTok Business

The overvalued edge cloud platform has lowered its revenue guidance.
Anthony RussoOct 15,2020,16:43

Shares of Fastly (NYSE: FSLY) tumbled 24% by midday Thursday after the company lowered its third-quarter guidance after its largest customer, ByteDance-operated TikTok, booked lower-than-expected results.

The San Francisco-based firm said in a statement that it now expects revenues to come in the range of $70 to $71 million. That’s down from its previous forecast of $73.5 to $75.5 million.

“Due to the impacts of the uncertain geopolitical environment, usage of Fastly’s platform by its previously disclosed largest customer did not meet expectations, resulting in a corresponding significant reduction in revenue from this customer,” the edge cloud platform said in a statement.

In essence, lowered revenue guidance didn't come as such a hit. However, as Barron’s made the argument today that “when a highly valued stock falls, it falls hard.”

This is especially relevant now given the current state of the market. As of Wednesday’s close, Fastly was trading 33 times its forecasted sales of 2021.

To make matters worse for Fastly today, several analysts downgraded its stock. As of midday, Fastly traded as low as $85.10 per share Thursday, or 31% lower from Wednesday’s close.

This isn’t the first time that Fastly’s stock has collapsed because of ByteDance. In August, shares of Fastly fell after its chief executive officer told analysts that ByteDance contributed to roughly 12% of its revenues over the last six months; less than 50% of that revenue came from the U.S.

ByteDance’s TikTok has been referred to by Washington as a “national security threat.” While the Trump administration moved to try and ban the app, the courts halted the attempt.

The stock plunge of Fastly today also had a domino effect on other software firms including Cloudflare (NYSE: NET) and Akamai Technologies (Nasdaq: AKAM), shares in which fell 8% and 4%, respectively.

While shares of Fastly are still trading a whopping 343% higher year-to-date—the company should serve as an example of what can happen to overvalued tech firms in this kind of market. You know the old adage, “buyer beware.”

Topics:Fastly, ByteDance, TikTok, Trump, Akamai, Cloudflare