Markets

Why Fastly Stock Is Sliding Again Today

What happened

Shares of Fastly (NYSE: FSLY) were sliding 6.5% lower as of 11:31 a.m. EDT on Tuesday. The edge computing company didn't report any news that would cause its stock to fall. Instead, it appears that a sell-off that began last week after two analysts expressed hesitation about Fastly's valuation is continuing to pick up momentum.

So what

Investors shouldn't be overly concerned when high-flying growth stocks like Fastly pull back somewhat. That's especially the case when the pullback stems from Wall Street analysts' actions.

Finger close to a lighted hexagon stating "edge computing" and other smaller lighted pentagrams surrounding it

Image source: Getty Images.

Craig-Hallum analyst Jeff Van Rhee and Bank of America analyst Tal Liani lowered their ratings on Fastly last week. Both analysts voiced their concerns about the stock's frothy valuation. However, after declining for three consecutive days, Fastly now trades well below Van Rhee's price target of $100 and Liani's price target of $90. 

Nothing has negatively impacted Fastly's business prospects in recent days, though. Actually, the company's prospects could even be bolstered as concerns mount about the increasing number of COVID-19 cases across the U.S. If the pandemic worsens, it's possible that more employees will continue to work from home for a longer period of time and that Americans will opt to shop online more than visiting stores. These trends would drive higher internet traffic, potentially causing demand for Fastly's edge computing and content delivery network platforms to rise.

Now what

The most important thing for Fastly now is to deliver on its potential. Investors will find out pretty soon how much progress the company has made: Fastly is scheduled to report its second-quarter results on Aug. 5.

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Keith Speights owns shares of Fastly. The Motley Fool owns shares of and recommends Fastly. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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