Both are CDN service providers, why does Fastly stand out? Is $FSLY After the Plunge an Opportunity?
The much-anticipated SaaS dark horse $Fastly(FSLY)$ has risen by more than 300% in the three months before August, and it has been a momentary success. But then Fastly’s share price fell from 117 to $16 when its financial report exceeded expectations. The drop of nearly 40% is embarrassing. I believe that you have read a lot of articles analyzing Fastly’s financial report. This article wants to discuss Fastly’s fundamentals and prospects from the perspective of Fastly’s business. At the end of the article, we will talk about our views on Fastly’s stock price through the recent observation of retail sentiment and large orders, combined with technical analysis.
First of all, fasly is a SaaS vendor, that is, Software as a Service. Its main business is to provide CDN services to individuals and enterprises. When it comes to SaaS, everyone must be familiar with it. Seeing SaaS is like seeing a sweet pastry. However, SaaS is only a model of the company’s product operation, and does not reflect the essence of the company’s business. All Fasly products and solutions revolve around CDN. CDN, Content Delivery Network, the Content Delivery Network
On the basis of understanding CDN, let’s take a look at Fastly’s products. Fastly’s top two products are related to Edge Computing, which is the future development direction of CDN and a possible tipping point for Fastly, which we will introduce later. The next five items: CDN, image optimization, video and video streaming, cloud security, load balancing, these are typical CDN services: CDN solves the most basic access speed problem; cloud security is to resist malicious traffic attacks for customers; Load balancing can help customers distribute centralized traffic to different nodes; image optimization and video products are segmented products, focusing on providing further optimization for customers who provide image and video services.
We believe that Fastly has product advantages over other CDNs in the media (image, audio and video) segment. Customers with a lot of heavy media content choose Fastly, such as TikTok, Twitter, Pinterest, imgur, etc. Due to this epidemic, the popularity of social applications has surged, which has also indirectly driven the demand for media file acceleration. Therefore, fastly, which has many young people who love social application customers, can benefit. At the same time, many of Fastly’s customers are SaaS companies ( $Shopify Inc.(SHOP)$ , Github). So to a certain extent, Fastly is a SaaS company that provides services to SaaS companies. Does it feel like a nesting doll? The above two points are also the reasons why we believe that Fastly’s growth rate can be so fast: in addition to the growth of new Fastly customers, the demand of Fastly’s existing customers is also growing.
A trend that can be seen recently is that many CDN service providers ( $Cloudflare(NET)$ , Akamai) are beginning to rely on Edge Computing, which is closely related to the concept of 5G. Edge computing refers to computing that occurs near the data source. Edge computing focuses on real-time performance and security. With the development of 5G, more and more traffic will be generated by end devices, and the transmission demand will also increase. More traffic and computing will occur on the side of the data source, that is, the Edge. In the future, the computing center may migrate from the Cloud to the Edge, so the CDN business will also develop to the Edge along with this trend. Fasly began to deploy Edge Computing early, and its ambitions can be seen. We think Fastly can benefit from edge computing if the 5G concept explodes in the future.
In order to better understand edge computing, let’s still take TikTok as an example: a music festival is suddenly held somewhere, and internet celebrities all over the country gather in this place to send short videos, then TikTok will respond to this issue in a short period of time. The location quickly deploys a large amount of traffic services and computing power, and the help of CDN is indispensable. Analogous to express delivery, if a large commodity market is suddenly built in a place, various demands will follow, among which logistics demands are essential. Then it is necessary to add service points in the local area. Such service points may be temporary. This is the edge computing node (Edge Node)
In fact, when popular stocks fall from the altar and make investors lose confidence, it is often an opportunity. During the dip and subsequent consolidation, the bookmaker can collect chips from retail investors at lower prices to prepare for the next stretch. We believe the latest decline was a correction caused by a high profit exit. As long as there are no issues with Fastly’s fundamentals, we remain bullish on the company. TikTok, one of Fasly’s biggest customers, has faced regulatory issues that have made investors skeptical about Fastly’s future. We feel that as long as TikTok is still around, Fastly should not be affected too much. No matter who acquires Tiktok, it should not affect its choice of CDN vendors. Take GitHub, which was acquired by Microsoft in 2018 as an example. GitHub has been using Fastly’s services since 2014, and has not changed its CDN service provider after the acquisition.