Benzinga | Aug 24, 2020 11:21AM EDT

Fastly Has 'Sustainable Product Differentiation,' Analyst Says In Upgrade Of Cloud Stock

A virtual meeting with Fastly Inc's (NYSE:FSLY) CFO Adriel Lares and industry checks provide greater optimism around the company's potential to gain market share, its relationship with Microsoft Corporation (NASDAQ:MSFT) and the Compute@Edge launch in the fourth quarter, according to Raymond James.

The Fastly Analyst: Robert Majek upgraded Fastly from Market Perform to Outperform and established a $100 price target.

The Fastly Thesis: Fastly's software-based content delivery network and programmable platform for developers provide "sustainable product differentiation," which should support market share gains and long-term growth, Majek said in a Monday upgrade note. (See his track record here.)

The differentiation is based on web performance and image delivery, which allows the company to command among the highest CDN pricing and margins, the analyst said.

"Customers are increasingly adopting the company's platform to deploy their own code & applications to improve their website's performance and/or lower their cloud bills by reducing origin server requests."

Majek said Fastly's latest high-profile customer wins include Amazon.com, Inc. (NASDAQ:AMZN), which has chosen Fastly over its own CDN.

The beta version of Compute@Edge has received strong customer feedback, and the company expects it to make a "material revenue contribution" in 2021, the analyst said.

The company believes Fastly can preserve and grow its TikTok business under a Microsoft Corporation (NASDAQ:MSFT) acquisition, according to Raymond James.

FSLY Price Action: Shares of Fastly were down 1.35% at $83.88 at last check Monday.

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