“8 reasons why every investor needs to own $FSLY for the next 12+ months”

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1) GROWTH = $FSLY reported 2020 Q2 revenues of $74.6M which was 62% YoY growth compared to $46.2M in 2019 Q2.

This was also a nice increase over 2020 Q1 revenues of $63M which was a 38% increase compare to 2019 Q1.
Even though this Covid pandemic helped accelerate revenues from some of their larger enterprise customers, $FSLY still has a lot of exposure to travel companies so putting up these growth numbers despite those headwinds is very impressive.
As this pandemic comes to an end in 2021 and we see an economic recovery especially in the travel industry it will provide a very nice boost to their revenues in addition to their large ecommerce, social, fintech and media customers who will continue doing well post-Covid.
2) MARGINS = In 2020 Q1 $FSLY reported gross margins of 57.6% with DBNER at 133%.

In 2020 Q2 gross margins had already expanded to 61.7% with DBNER increasing to 137%.

These are strong improvements for a young growth company and obviously heading in the right direction.
As $FSLY continues to grow their enterprise customers and rolls out Compute@Edge we should see more gross margin expansion. $FSLY should be able to increase GM’s by 2-3% per quarter and to 75-80% by end of 2021.

I would expect DBNER to continue increasing as well to over 145%.
3) VALUATION = with $FSLY up 11% today it changes the valuation & multiples but at $88/share the stock is trading at 31x 2020 revenues. I’m using the midpoint of management’s full year guidance of $290-300M. I think there’s a decent chance they beat it and end up with $300-310M.
2021 is where it gets more interesting because we don’t know what the economic recovery will look like and how quickly Compute@Edge will accelerate current enterprise customers revenues or enable $FSLY’s sales team to steal larger customers away from their competitors like $AKAM.
There are lots of variables to consider with regards to good and bad revenue surprises but assuming we get a positive resolution to the TikTok drama and we see a steady return of travel in 2021 then I believe $FSLY could hit $465M in 2021 which would be 55% YoY growth.
In my opinion if $FSLY can finish this year at or above $300M+ with a better than 50/50 chance of hitting $465M next year with expanding gross margins and a successful rollout of Compute@Edge then $FSLY deserves a 28-30x P/S multiple which gives us a target price of $126 to $135.
4) CUSTOMERS = $FSLY reported 304 enterprise customers in 2020 Q2, a small increase from Q1. I believe this increase was smaller than anticipated b/c of the difficulty onboarding new cusdomers during Covid. We should see an acceleration of new enterprise customers in Q3 and Q4.
$FSLY is already the fastest and most developer friendly CDN but the introduction of Compute@Edge will also make them the most advanced and most efficient CDN. This is why the big cloud companies like $AMZN AWS and $MSFT Azure will have to keep using $FSLY for their cusdomers.
Adding more enterprise customers is crucial for $FSLY b/c although their enterprise customers only represent 15% of total customers they account for 88% of revenues. The big money and big margins lie within those enterprise customers which is why Compute@Edge is the game changer.
5) TEAM = $FSLY has a solid management team with @joshuabixby serving as CEO since February 2020. He was President the previous 3 yrs.

The founder, Artur Berman who served as CEO from 2011 until Feb 2020 decided to step into the Chief Architect role.

6) PRODUCT = $FSLY is the best CDN which is why the most innovative companies & best development teams are using $FSLY over other options

Below is a sample of the customers that choose $FSLY — it’s literally a who’s who in cloud, ecommerce, social, media, fintech, video, content
7) OWNERSHIP = when it comes to growth stocks like $FSLY, two things I look for are institutional ownership and management ownership especially the founders. As you can see from the link below $FSLY has both including hedge funds like Whale Rock Capital

8) INVESTMENT THEME = when I decide to invest in a company it usually has to fit one of my overall investment themes such as “more companies moving to the cloud” or “more people shopping online” or “work from home” or “more people doing online payments” and so forth.
As we continue moving into a digital economy w/ billions of people running their lives through their phones & laptops...consuming more data, more video, more content, etc then a company like $FSLY that makes the internet faster, safer and more efficient will continue winning.
I could list another 8-10 reasons why I’m bullish on $FSLY but unfortunately I’m running out of available tweets in this thread so I had keep it shorter than planned.

$FSLY is an exciting company with a bright future, lots of growth potential and a reasonable valuation.
As we await a resolution to the TikTok drama I’ll continue holding my $FSLY shares.

If we get an acquisition by $MSFT $TWTR $ORCL $GOOG $FB or some combination thereof we could see a 10-15% move higher for $FSLY b/c this would remove the biggest hurdle from going to new highs.
In full disclosure $FSLY currently makes up 42% of my portfolio and that’s after trimming 8% of my position today on the 11% move higher.

Thanks for reading and feel free to ask me any questions that I wasn’t able to address in this thread.
You can follow @JonahLupton.
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