Fastly Inc. (NYSE:FSLY): Why It’s The Best Work from Home Stock

When you look at some of the hottest stocks in the market over the last few months, certain names immediately come to mind. Companies like Shopify (NYSE:SHOP) and Zoom Video Communications (NASDAQ:ZM) have become household names as they have vastly outperformed the majority of the market this year. However, Fastly Inc. is a cloud technology company that is outdoing even those red-hot stocks.

Companies that are involved in cloud computing are the perfect example of which stocks are gaining from the current situation. With a massive shift toward working from home and digital transformation, many companies are moving their businesses into the cloud to continue operating without employees in the office. That’s why a company like Fastly has been so hot and is up 260% year to date. It’s actually been the best performing work-from-home stock during the pandemic. Here are a few reasons why Fastly should be on your radar even after its recent run to new all-time highs.

Digital Transformation Leader

Cloud computing, which is essentially the delivery of computing services over the Internet, has seemingly unlimited potential at this time. This is part of the reason why Fastly has risen to prominence so quickly. With Fastly’s cloud-based content delivery network, businesses can achieve better economies of scale since they don’t have to pay for servers and other physical computing technology that wastes space and money. The company is best known for its edge computing services, which allows its customers to process tons of data quickly in real-time.

With so many data-rich applications and growing companies in the software-as-a-service sector, it’s no wonder why this stock has been on such a nice run. The company made an important announcement last week when it announced that its network has reached 100 terabits per second of connected edge capacity. Without getting too deep into the technical specifications here, it’s safe to say that 100 terabit network speed is extremely quick. Fastly’s network plays a vital role in providing stability and support to thousands of different websites that provide news, e-commerce, and entertainment. In the age of digital transformation and the remote work revolution, this is the type of company that can grow exponentially.

Prominent Clients

To quote Fastly’s about page: “Fastly helps people stay better connected with the things they love.” It’s a simple yet intriguing explanation of why this company is quickly becoming the leader in digital transformation. Another great reason why Fastly has been the favorite work-from-home stock among investors has to do with all of the prominent clients it has. It’s enterprise clients, which are clients that spend $100k or more in a 12-month period, grew from 243 to 297 year-over-year in Q1, which is a testament to how strong this company’s cloud services are.

Some of the prominent companies that Fastly serves include Vimeo, Spotify, Slack, The New York Times, and Shopify. These are cutting edge businesses that are developing applications that require lightning-fast speed and optimization in order to function. The fact that they rely on Fastly to power those applications tells you a lot about just how powerful its cloud copmuting technology is.

Don’t Forget Fundamentals

One of the things that investors should be concerned about in this macro-driven market is the fact that many of the hottest stocks are not rising based on fundamentals. This could lead to some volatility in the coming months for growth stocks like Fastly, particularly if the major companies using its services are forced to scale back some of their new application development in order to cut costs.

That’s why it’s worth mentioning that Fastly posted a net loss of $12 million in Q1 and does not generate positive free cash flow figures at this time. With that said, the top-line growth for the company has been impressive, as total revenue for Q1 2020 increased 38% year-over-year to $63 million. The company also increased its guidance for 2020, which is a positive sign that might mean Fastly is on its way towards profitability. Just keep in mind that its current valuation is quite rich.

Digitize or Be Left Behind

Fastly is a stock that has been on fire lately thanks to the digital transformation of businesses, the telecommuting trend, and the increasing need for reliable cloud-based networks. With so many companies faced with the decision to either digitalize or be left behind, Fastly has a ton of potential. It’s remarkable that this stock has been the best performing work-from-home stock, but keep in mind that it is expensive based on fundamentals and might be subject to volatility. The bottom line is that if you are willing to stomach the risk, Fastly can pay off handsomely as a long-term investment.