written by reader Large FSLY drop

By Bala, February 18, 2021

First time poster here.
The last 2 days saw Fastly drop a ton, but other than the sector being down, there doesn’t seem to be a good reason for the large drop. What would be a good entry point?

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Travis Johnson, Stock Gumshoe
February 19, 2021 12:50 am

The most immediate reason was their earnings report — which was excellent, but included a forecast that was less optimistic than analyst forecasts. You need a lot of optimism to justify paying 40X sales for any company, so the slightly dour sentiment brought the shares down a bit. Still at a historically ludicrous valuation (unprofitable, now more like 30X sales), but a little less wild than before.

If you want a buy price that makes logical sense here you’ll have to use relative valuation (NET, etc), technical analysis (200 day moving average, RSI, etc.), or, if you’re pretty certain of the company’s appeal, small buys whenever it dips and an iron stomach to handle the volatility.

When whole swathes of the market trade at valuations we’ve almost never seen before, there’s a lot of guessing involved. Whether the market decides to panic about growth stocks in general is likely to mean a lot more this year than Fastly’s operating performance. If the market’s happy paying 50X revenue for the best growth stocks who can grow revenues at 30-50% a year, FSLY should be fine… if the markets send these kinds of companies back down to 10X sales, which is how many of them were (or might have been) valued 2-3 years ago, it’s a long way down for a lot of market darlings.

More in the Friday File from me coming soon, but if other folks have thoughts on FSLY I’d like to hear them as well.

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john wick
john wick
February 19, 2021 3:38 pm

Hey travis not to destroy the thread but since I found you here today , do you know why both the all the 10x
motley fool threads were deleted? Cant click the link to any? Thanks a million for everything you do

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