Fastly downgraded by analysts following global outage
Although Fastly was able to resolve its technical issues quickly, analysts fear the outage would put added pressure on its ‘already challenging’ 2021 revenue guidance.
- Fastly Inc (NYSE: FSLY) share price is down 4.6% two days after its network went dark
- Although shares remarkably opened higher immediately after the breakdown, they have since fallen 12% since Wednesday afternoon (09 June 2021)
- The global outage saw a whole host of popular news and e-commerce websites go offline for nearly an hour
- The issue was quickly fixed, but analysts fear this will cause customers to switch to other content delivery networks and impact new sales
- Buy and sell Fastly Inc shares with an IG account
Fastly stock price: What’s the update?
Fastly shares have slumped 12% since Wednesday, a day after its network suffered an outage that took down a host of popular news, e-commerce and government websites.
The content delivery network (CDN), which helps websites to load their pages faster, experienced disruption for an hour on Tuesday. News websites including BBC, CNN, the New York Times and Bloomberg, as well as e-commerce services like Amazon and Shopify went offline during that period as a result.
Remarkably, Fastly’s share price actually opened higher immediately following the shutdown.
Fastly said after the incident that a valid configuration change by a customer had triggered an undiscovered software bug. The company was able to fix the issue 49 minutes after discovering the problem.
‘This outage was broad and severe, and we’re truly sorry for the impact to our customers and everyone who relies on them,’ Nick Rockwell, Fastly’s senior vice president of engineering and infrastructure, further noted in the same blog post.
He added that the company will now work on improving its remediation time and software quality assurance and testing processes.
What’s the damage to Fastly’s stock?
Following the global outage, Oppenheimer analyst Timothy Horan downgraded his rating on the Fastly stock to ‘perform’ from ‘outperform’ without a price target.
He noted that although outages happen to all cloud computing platforms, with Fastly responding‘rapidly and with candor’, customers may now switch to other providers, being that switching costs for content delivery networks are relatively low.
Horan also opined that the disruption could impact Fastly's new sales ‘for a while’, adding that Q2 revenue and margins are also under comparison pressure.
Piper Sandler’s James Fish kept his rating at ‘neutral’ and price target of US$45 in his post-outage note.
However, he noted that Fastly customers could experience an influx of refunds that would likely make its ‘already challenging’ 2021 guidance even ‘more difficult’ to hit.
Given that Fastly’’s customers ‘tend to be very large and operate a multi-CDN strategy’, Fish also believes Fastly may be ‘put in the penalty box’, which could result in traffic share moving toward other CDNs.
He concluded by saying that Fastly is his ‘least preferred’ among CDNs in terms of exposure to the sector.
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