We came across a bullish thesis on Fastly, Inc. (FSLY) on WallStreetBets subreddit page by saas_stats. In this article, we will summarize the bulls’ thesis on FSLY. Fastly, Inc. share was trading at $7.39 as of Oct 9^th. FSLY’s forward P/E was 185.19 according to Yahoo Finance.

An overhead view of a large-scale data center with rows of servers and blinking lights.

Fastly (FSLY), trading at a ~1.9x revenue multiple, appears undervalued compared to similar SaaS companies growing at 5-10% annually. Despite negative EBITDA margins of -20% to -30%, Fastly's valuation could potentially rise to 3-4x revenue, aligning with peers. The company operates in the content delivery network (CDN) space, which has a high barrier to entry due to the complexity and cost of maintaining a globally distributed server infrastructure. This provides Fastly with a strong competitive moat, reducing the threat of new entrants.

Fastly's long cash runway, estimated at 5-10 years without the need for additional funding, provides stability while the company works towards profitability. Key catalysts for significant upside include reaching EBITDA or free cash flow breakeven, stronger-than-expected quarterly revenue growth in the 10-20% range, and successful launches of AI-related products. In a higher interest rate environment, Fastly could see its valuation increase to 5-10x revenue by 2025 if one or more of these factors materialize. Given these factors, Fastly represents a compelling investment opportunity with significant upside potential in the coming years.

Fastly, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held FSLY at the end of the second quarter which was 23 in the previous quarter. While we acknowledge the risk and potential of FSLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FSLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.