Fastly, Inc. (NYSE: FSLY) saw its stock price plummet by 5.01% during Friday's trading session, as investors reacted to growing concerns about the company's fundamentals and growth prospects. The sharp decline comes amid a broader reassessment of small-cap stocks, with some analysts warning investors to exercise caution with certain companies in this category.

According to a recent analysis, Fastly, which provides content delivery and edge cloud computing services, is facing several challenges that make it a potentially risky investment. The report highlights three key issues plaguing the company: 1. Unimpressive sales growth, with a 15.3% annual increase over the last three years, which falls below the typical growth rate for software companies. 2. Poor unit economics and high infrastructure costs, resulting in a gross margin of 54.4%, one of the lowest among software companies. 3. An unfavorable liquidity position that could necessitate additional equity financing, potentially diluting existing shareholders.

The stock's decline reflects growing investor skepticism about Fastly's ability to compete effectively in the rapidly evolving cloud computing market. With a market capitalization of $952 million and a forward price-to-sales ratio of 1.6x, some analysts suggest that there may be better opportunities elsewhere in the small-cap space. As the company faces these headwinds, investors will be closely watching for any signs of improvement in Fastly's financial performance and market position in the coming quarters.