Why Fastly Stock Is Soaring Today
Key Points
Oppenheimer upgraded Fastly to "Outperform" with a $35 price target.
The analyst pointed to rising contract values and strong demand for Fastly's AI and security tools.
Even after Friday's jump, Oppenheimer's target implies more upside.
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Shares of Fastly (NASDAQ:FSLY) are skyrocketing on Friday, Oct. 9. The cloud computing and content delivery network veteran has gained 19% as of 2:54 p.m. ET, driven by one bullish analyst report.
An upgrade with AI in the mix
Oppenheimer analyst Param Singh raised Fastly's rating from "Neutral" to "Outperform," with a target price of $35 per share. That's 38% above Thursday's closing price, and Oppenheimer's target remains 17% away even after Friday's jump to $30 per share.
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Singh cited Fastly's rising contract values and an array of promising service launches. In particular, Oppenheimer's industry checks suggest strong interest in the company's AI agents and security tools. These are lucrative, high-margin offerings, currently paired with high-octane sales growth.
Crucially, Singh also sees deep value in Fastly's low-priced shares. His favorite metric here is enterprise value to next-year sales estimates, where Fastly trades at a discount to its cloud-and-security peer group.
Image source: Getty Images.
The PEG ratio agrees
I prefer a different valuation metric, but the results are the same. Fastly's price-to-earnings-to-growth (PEG) ratio is 0.46 today, according to Finviz data. Alongside the stock's 10 closest peers, Fastly is the only one of these 11 stocks that carries a PEG ratio below 1.0. For those unfamiliar with PEG valuation, a lower value indicates a combination of low share prices and high earnings growth expectations. Many growth investors see a PEG of 1.0 as a reasonable valuation, and Fastly looks tempting in this light.
So Singh and I use different tools to reach similar takeaways. I agree with Oppenheimer's analysis. The company faces massive competition, and its financials have been uneven in recent years, but Fastly is a solid bet on data security and cloud computing in the AI era.
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Anders Bylund has positions in Fastly. The Motley Fool has positions in and recommends Fastly. The Motley Fool has a disclosure policy.
