NEW YORK, May 28, 2024 (GLOBE NEWSWIRE) -- Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, announces that a class action lawsuit has been filed against Fastly, Inc. (“Fastly” or the “Company”) (NYSE: FSLY) in the United States District Court for the Northern District of California on behalf of all persons and entities who purchased or otherwise acquired Fastly securities between February 15, 2024 and May 1, 2024, both dates inclusive (the “Class Period”). Investors have until July 23, 2024 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
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Fastly operates an edge cloud platform for processing, serving, and securing customer's applications. The edge cloud is a category of Infrastructure-as-a-Service that purportedly enables developers to build, secure, and deliver digital experiences. Fastly's platform includes a Content Delivery Network ("CDN"), or a geographically distributed network of proxy servers and their data centers. Content owners such as media companies and e-commerce vendors pay CDN operators to deliver their content to their end users. Certain companies have adopted a "Multi-CDN" framework which combines multiple CDNs from various providers into one large global network.
In 2023, a "consolidation trend" emerged in the CDN industry, in which several prominent Multi-CDN companies reduced the number of CDN vendors they had previously managed in an effort to simplify their operations and increase efficiency, opting instead to manage fewer CDN vendors. Facing reduced competition, Fastly was able to materially increase its market share and drive favorable sequential growth.
On February 14, 2024, Fastly issued a press release providing full year ("FY") 2024 revenue guidance in a range of $580 million to $590 million. In that same press release, Fastly's Chief Executive Officer Defendant Todd Nightingale ("Nightingale") was quoted as stating, "[t]his quarter demonstrated the progress we've made in operational and financial rigor resulting in strong gross margins and non-GAAP net income," and "[o]ur go-to-market, packaging and channel efforts through 2023 delivered an inflection in our customer acquisition as we closed out the year. This positions us well for 2024, driving our mission to make every user experience fast, safe, and engaging."
According to the filed complaint, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) contrary to its representations to investors, Fastly was in fact experiencing a significant deceleration in growth among its largest customers and was losing the increased market share it had gained as a result of the 2023 CDN consolidation trend; (ii) the foregoing issues were likely to have a material negative impact on the Company's revenue growth; (iii) accordingly, the Company was unlikely to meet its own previously issued revenue guidance for FY 2024; (iv) as a result, the Company's financial position and/or prospects were overstated; and (v) as a result, the Company's public statements were materially false and misleading at all relevant times.
On May 1, 2024, Fastly announced its first quarter ("Q1") 2024 financial results. Despite the Defendants' positive statements just three months earlier about Fastly's performance and near-term business prospects, the Company reported revenue of only $133.52 million, missing consensus estimates by $0.35 million. The Company also lowered its FY 2024 revenue guidance to a range of $555 million to $565 million, significantly below its previously issued FY 2024 revenue guidance of $580 million to $590 million, and likewise below consensus estimates of $584.62 million for the same period.
That same day, Fastly held a conference call with investors and analysts to discuss the Company's Q1 2024 results (the "Q1 2024 Earnings Call"). In explaining the Company's disappointing revised FY 2024 outlook, Defendant Nightingale stated that "[t]he biggest factor is a reduction of revenue from a small number of our largest customers. The first-quarter revenue from our top 10 customers dropped from 40% to 38%[,]" and that the Company saw "significant volatility" in the Multi-CDN strategy run by many of Fastly's top 10 accounts. Further, Fastly's Chief Financial Officer Defendant Ronald Kisling stated that the Company is "facing a challenging environment of revenue declines in our largest customers, overshadowing the impact of new customer acquisition and product pipeline[,]" and that the Company would not benefit in 2024 from the favorable impact of the early 2023 CDN consolidation that drove favorable sequential growth in the prior year same period.
Then, on May 2, 2024, Bank of America downgraded Fastly stock from a "Buy" rating to an "Underperform" rating and cut its price target on the stock from $18 per share to a mere $8 per share, noting that "[d]ecelerating growth in Fastly's largest customers, share loss in delivery, and limited visibility in 2H cause us to question a rebound in 2024," and that "[w]hile we continue to like Fastly's positioning in the edge compute market, we see it as a 2025 opportunity instead of a near-term growth driver."
Following these developments, Fastly's stock price fell $4.14 per share, or 32.02%, to close at $8.79 per share on May 2, 2024.
If you purchased or otherwise acquired Fastly shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
About Bragar Eagel & Squire, P.C.:
Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, California, and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.
Contact Information:
Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Marion Passmore, Esq.
(212) 355-4648
investigations@bespc.com
www.bespc.com
