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Shares of Fastly (FSLY) closed 14% lower on Tuesday after a split among analysts, with one firm issuing a bullish note and another taking a bearish stance. Many investors appeared to align with the negative assessment.
On the bearish side, Craig-Hallum analyst Jeff Van Rhee downgraded Fastly from “buy” to “hold,” setting a $24 price target. The stock closed Monday’s session at $24.37, roughly in line with the firm’s projection. Van Rhee said Fastly’s shares have risen sharply since last September, when the now-defunct “buy” rating was issued. At current levels, the firm does not expect much additional upside as Fastly faces soaring hardware costs.
Meanwhile, Evercore analyst Peter Levine initiated coverage with an “outperform” rating and a $32 price target. Levine argued that strong demand for content delivery and edge computing services outweighs Fastly’s valuation. In the Evercore view, Fastly’s combination of AI computing at the network edge and security tools makes the company an attractive investment.
Investors largely favored the more cautious outlook. As of Monday night, Fastly had gained 345% over the past 52 weeks, and even after Tuesday’s decline, the stock was still up 282% over the last year.
While both analyst notes cited relevant factors, the bearish view resonated more given the company’s ongoing turnaround and financial profile. Fastly is in the middle of a turnaround under new management, with financials that remain under scrutiny. In its February fourth-quarter report, the company posted 22% year-over-year revenue growth, but earnings were negative on a trailing twelve-month basis.
The stock also trades at 75 times free cash flow, according to the article. The incoming AI edge computing orders are expected to require significant execution to support the valuation.
Despite the downgrade and the concerns highlighted by the bearish camp, the article notes that AI tailwinds remain a key part of the bull case. Management expects positive adjusted earnings and at least $40 million of free cash flow in 2026.
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