Is It Time To Reassess Fastly (FSLY) After A Volatile Yet Strong Year?

• Investors may be wondering whether Fastly's current share price lines up with its real worth, or if the recent volatility has created a potential opportunity or a warning sign.
• The stock is down 9.3% over the past week and 15.6% over the past month, yet still up 73.5% year to date and 119.9% over the past year. These moves can influence how you think about both upside and risk.
• Recent attention on Fastly has focused on how the business is positioned within software and internet infrastructure, including discussions around its competitive footing and how it responds to changing customer demand. These themes help explain why the share price has been so sensitive in the short term, even after strong longer term returns.
• Fastly currently has a valuation score of 2 out of 6, based on how often it screens as undervalued across several checks. The rest of this article will unpack what that means across different valuation methods, before finishing with a broader way to think about the stock's value beyond just the numbers.

Fastly scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Fastly Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a stock could be worth today by projecting the company’s future cash flows and discounting them back to the present using a required rate of return.

For Fastly, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow stands at about $55.9 million. Analyst inputs cover several future years, and Simply Wall St extends these into longer range projections. Within that framework, Fastly’s projected free cash flow for 2035 is $321.4 million, with each future year discounted back to today in dollar terms.

Adding up these discounted cash flows produces an estimated intrinsic value of $23.96 per share. Compared with the current share price, this implies the stock trades at a 26.2% discount, which points to Fastly screening as undervalued under this particular cash flow model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Fastly is undervalued by 26.2%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fastly.

Approach 2: Fastly Price vs Sales

For companies where earnings are not the main focus, the P/S ratio is often a useful way to compare what investors are paying for each dollar of revenue. It is especially common for software and internet infrastructure businesses, where reinvestment and accounting items can make profits less straightforward to interpret.

Growth expectations and risk both influence what a “normal” P/S multiple looks like. Higher expected revenue growth or more predictable cash flows can justify a higher P/S, while slower growth or higher risk usually points to a lower, more cautious multiple.

Fastly currently trades on a P/S ratio of 4.24x. This is above the broader IT industry average of 2.03x and also above the peer group average of 1.85x. Simply Wall St’s “Fair Ratio” for Fastly is 3.43x, which is a proprietary estimate of what the P/S could be given factors such as earnings growth, industry, profit margins, market cap and company specific risks.

The Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for Fastly’s own profile rather than assuming all companies should trade on the same multiple. Compared with the current P/S of 4.24x, the Fair Ratio of 3.43x suggests Fastly trades at a richer level than this tailored benchmark.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Fastly Narrative

Earlier it was mentioned that there is an even better way to think about valuation, and on Simply Wall St that takes the form of Narratives. You build a clear story about Fastly, link that story to specific assumptions for future revenue, earnings and margins, and end up with a fair value that you can easily compare with the current share price. You might lean toward a very cautious view with a fair value around US$7.00, a more central view closer to US$19.17, or a more optimistic view around US$20.00. All of these sit alongside community Narratives, such as one that focuses on AI, edge computing and an Agentic economy. Every Narrative is hosted on the Community page, updated when fresh news or earnings arrive, and ready for you to use as a simple, visual way to decide whether Fastly looks expensive or cheap relative to your own story.

For Fastly, however, we will make it really easy for you with previews of two leading Fastly Narratives:

🐂 Fastly Bull Case

Narrative fair value: US$19.17

Implied discount to this fair value at the last close of US$17.68: about 7.8% below the narrative fair value

Analyst modeled revenue growth used in this narrative: 11.56% per year

• Focuses on growth in higher margin edge security and computing products, with cross selling across Fastly's platform as a key driver of revenue per customer.
• Leans on an expanded enterprise and international push, plus tighter cost control, to support improving margins and stronger free cash flow over time.
• Highlights risks around heavy competition from larger cloud providers, customer concentration, ongoing high investment needs, and regulatory costs that could pressure margins.

🐻 Fastly Bear Case

Narrative fair value: US$4.97

Implied premium to this fair value at the last close of US$17.68: about 256% above the narrative fair value

Revenue growth assumption used in this narrative: 9.93% per year

• Argues that once a widely shared market story takes hold, a stock can move a long way away from its fair value, and that Fastly risks being priced more on story than on fundamentals.
• Frames Fastly as tied to interest in AI and edge computing, with potential benefits if usage of large language models and coding tools keeps expanding.
• Flags that broader macro and sector rotations could shift attention and capital toward other areas such as defence or energy, which could cap how much investors are willing to pay for Fastly over time.

Do you think there's more to the story for Fastly? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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