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Is Fastly Stock a Solid Long Term Investment?

Stock Market

Do you ever stop and think about what it might be like to fill your stock portfolio with several long-term investments that could potentially allow you to have more money than you could ever even dream of right now? Do you ever wish that it was possible to gain some kind of insight into which stocks could potentially net you such a payday and which ones would be better left alone? If you’ve thought about these things, then you're just like a lot of other people that have thought about exactly the same thing. Many people decide to invest in the stock market because there is the potential to make a great deal of money. That said, you don't always have the opportunity to make that much money. That is precisely where the catch lies. It's easy to think about investing in terms of choosing all the right Investments and making money off of each and everything that you do, but the reality of the situation is often much different. Truth be told, it's usually a lot harsher than you might want to believe that it is. Take Fastly stock, for example. Traded as FSLY on the stock market, this is a company that many consider to be at the forefront of the tech market. That usually means two things. First and foremost, any company that's capable of sticking around for any appreciable length of time usually has a pretty solid foundation under them. Unfortunately, it usually also means that their performance in the stock market is volatile, at best.

Characteristics of Tech Stocks

There's no way around it, trying to understand all of the ins and outs associated with tech stocks can be incredibly frustrating. You're often left wondering exactly how you should proceed. After all, most tech stocks that are capable of performing at a high level are also capable of making you a great deal of money in the stock market. The problem is that the overwhelming number of them don't perform well in the long run and that means that you can lose your shirt investing in these types of stocks. There is a reason that they're so volatile in the stock market. It's largely because even the ones that are capable of outperforming the competition have more than their fair share of ups and downs. You might go as far as saying that it is the nature of tech stocks. These types of companies are designed to fill a need based on technological advancements that might not have existed a year ago or even six months ago. As such, they are reliant on being able to develop technology, which is costly. In addition, they're constantly trying to stave off their competitors who are doing the exact same thing. That makes for a rather rocky business profile and it certainly doesn't help things on the stock market. This is especially true if you're dealing with a company that is working with some type of technology that is brand new or that isn't entirely sound as of yet. In short, it's no wonder that virtually every tech stock sees their value go up and down like a roller coaster when it comes to the stock market. Every day is a new day and with it, come new challenges that must be overcome. Some days, the company in question triumphs and on other days, they have to go back to the drawing board licking their wounds in order to fight another day. All of this is reflected in the stock market. Unfortunately, it also makes these types of companies more vulnerable to things that are going on in the world around them that may or may not have anything to do with them, at least directly. When the economy starts to get shaky and investors get weary, these are often the first stocks that people want to unload.

A Solid Long-Term Investment?

Fastly deals mostly with making the Internet run faster, hence the company's name. They're all about putting everything into the cloud and then finding new and creative ways to get the information that they're working with closer to the data source so it doesn't have to jump through as many hoops in order to come out on the other side, so to speak. It's all about finding a way to get people the data they need as fast as possible. In order to do that, they have to find new and innovative ways to keep the data closer to the source as opposed to allowing it to bounce around like a pinball in cyberspace. This isn't the easiest technology to develop. It's worth noting that it was first developed for the military, as is the case with a lot of tech. There was a point not long ago when there was basically only one company that was working on this type of thing because the individual in charge of it was the one who had figured out how to do this. As such, basically everything passed through his hands in order to generate these types of results. That's important because you have to stop and think about the fact that this company really hasn't been around all that long. Perhaps the more important question is, where will they be going in the future. Forget about what might happen with the stock within the next year, what is likely to happen with it within the next five years? As you might have already guessed, there are some interesting points that need to be discussed before you decide if this is a stock that you should purchase as a long-term investment.

Taking a Closer Look

In order to decide whether or not this is a stock that's right for you, you have to take a closer look at things. It's not as easy to make a decision where the stock is concerned as it is with some others because you don't have the luxury of relying on a general consensus from stock market analysts. Typically, you'll find the majority of these individuals leaning in one direction or another when you're thinking about a stock but in this particular case, it seems like they’re split right down the middle. Some people feel like it is not only a good idea to invest in the stock, but that it would be a mistake not to invest. Those people see the company being able to grow and expand, doing all manner of great things over the course of the next five years, many of which haven't even been invented yet. Others aren't quite so optimistic. In fact, the other half of stock market experts feel like this is probably one of the most volatile stocks that you could possibly consider investing in. When it comes to investing as a long-term option, they feel like it's risky, at best. Sure, the company is providing a service that is very much in demand right now. People are only going to be using the internet more and more over the course of the next five years. As a result, they'll be looking for services like this as they spend more time on the internet and as more information gets poured into cyberspace. However, that doesn't necessarily mean that this is the company that's going to have a monopoly on everything for the next five years. There are other companies out there that are capable of doing the same thing. As previously mentioned, this isn't the first company that has specialized in this particular niche.

The Roller Coaster Ride Explained

As previously mentioned, this stock has been on something of a roller coaster ride over the last year or two. That's really not all that different from a lot of other tech stocks. The thing that is different is that you can find a clear reason for why it happened. Yes, it's true that the company's stock rose by more than 300% in record time. It's also true that they lost more than 50% of that revenue in less than a month. However, there is a clear reason for the panic that investors were experiencing and the reason why they were selling their stock at a record pace. Like so many other companies, Fastly fell victim to the pandemic. Keep in mind, the entire company runs on the basis of providing real-time data information through the IT spectrum. When the pandemic hit and virtually everyone around the globe was enforcing work-from-home orders, investors became very fearful that this would have a permanent impact on the company's ability to stay afloat. They foresaw (incorrectly) companies keeping these types of orders in place in order to cut costs as opposed to letting workers return to work in the more traditional manner. In short, investors thought that this type of IT function would no longer be needed or wanted. As far as they were concerned, this realization was coming straight at them like a freight train and they couldn't sell their stock fast enough. The thing is, most places eventually returned to some manner of normalcy and the company found a way to not only keep itself afloat, but basically reinvent itself during the height of the pandemic. This made Fastly more valuable than ever, because they proved that they can be flexible by providing additional services and finding new ways to make many of those same types of services even more important than they were before. As a result, they have proven that they have some staying power in a big way.

Are There Other Issues?

Unfortunately, there are other issues going on at the company that can't be explained as easily. For example, the stock crashed by another 19.5% just this past November. It's a bit harder to explain this one away. When you start looking at things more in-depth, you will soon realize that the company has put themselves in a situation where it's virtually impossible for them to achieve their valuation without making a ton of money in every single quarter for the next several years. That's not just a tall order, that is something that is highly unlikely to occur. It would be hard to justify such things with a company that doesn't operate in the world of tech. Considering what this company does, it's almost laughable to think that they’ve put themselves in such a position, as it's practically impossible for them to achieve their goal. This realization causes a lot of investors to make the decision to sell early on. The idea that they could be more profitable in five years than they are now is somewhat unlikely, considering that they have essentially painted themselves into a corner. Furthermore, the stock is expensive. Buying enough shares to generate any kind of appreciable payday would mean that you have to spend a small fortune and there is absolutely no guarantee that you're ever going to get that money back, much less make money.

Is there a chance that Fastly might pull it off? Could investors who decide to buy several shares now enjoy an impressive payday five years down the road? Anything is possible. The thing you have to look at and ask yourself is whether or not it's even remotely likely. Every investor knows that the biggest potential paydays also come with the biggest risks. However, there is a major difference between taking a major calculated risk and simply jumping into a river full of piranhas head first and then thinking about the consequences later. If you're set on purchasing this stock and no one can change your mind, then go forward and let the consequences be what they may. On the other hand, it might be a better idea to pull back from this one and look for something else that's more likely to get you the financial success you want.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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