UNITED STATES-. Fastly Inc. shares plummeted on Thursday, weighing on other cloud providers after it shocked Wall Street with a weak read on third-quarter revenue. The company, among the strongest performers of 2020, issued a preliminary third-quarter revenue range that was below its prior guidance, pressured by lower usage by its largest customer, Chinese internet giant and TikTok owner ByteDance. Its forecast also came in below analysts’ projections.
The stock fell as much as 31% in its biggest intraday decline on record. Even with the drop, however, shares remain up more than 650% from a March-low. At least two firms downgraded the stock in the wake of the news. Baird cut its view to neutral, writing that the commentary was “surprising given strong broader e-commerce trends.” It added that a lack of visibility would be a “significant near- to medium-term overhang” on the stock, as Bloomberg reports.
Stifel downgraded the shares to hold, noting that the lower TikTok usage was related to geopolitical issues. While this is concerning, it added, it is potentially even more concerning that “several other customers had lower than-expected usage” as well. The stock decline pressured other names in the space, even as analysts said that Fastly’s issues shouldn’t have broader implications across the industry.
Limelight Networks Inc. dropped 5.2%, while Akamai Technologies Inc. was off 3.2%. B Riley FBR reiterated buy ratings on both stocks, writing that Fastly’s news was “more a company-specific issue than a demand-related lateral” for the pair. Both companies “do not index as heavily to TikTok as a customer,” the firm added.
Among other names, Twilio Inc. fell as much as 4% and Datadog Inc. dropped 7.9%. Cloudflare Inc. was down as much as 9.6%. Bloomberg Intelligence wrote that the preliminary report “doesn’t foreshadow weak results for Cloudflare,” as it “isn’t exposed to the same risk.”