A class action lawsuit was filed against Fastly, Inc. (NYSE:FSLY) on May 24, 2024. The plaintiffs (shareholders) alleged that they bought FSLY stock at artificially inflated prices between February 15, 2024 and May 1, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Fastly stock during that period can click here to learn about joining the lawsuit.
Don't Miss our Black Friday Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Fastly is a Software-as-a-Service (SaaS) provider. The company has developed an edge cloud network that enables developers to run, secure, and deliver websites and applications with speed and scale. Fastly also offers Content Delivery Network (CDN) services, which helps companies to deliver their content to end users.
Fastly’s Misleading Claims
The plaintiffs maintain that Fastly and two of its senior officers (Individual Defendants) deceived investors by repeatedly making false and misleading public statements about the company’s business practices and prospects during the Class Period.
As per the lawsuit, Fastly made tall claims during the Class Period. For instance, during the earnings call for Q4 FY23, the company noted that its customer retention rates were stable with LTM NRR (last twelve months net retention rate) at 113%. Meanwhile, Fastly’s customer count grew by 141 sequentially to 3,243 in Q4 while growing by 181 customers over Q3 FY23.
Moreover, the CEO (individual defendant) stated that the growing customer base would add to the company’s revenues over the years. At the same time, these customers were helping to diversify the revenue among verticals and improve profitability.
Here’s How the Truth Was Revealed
The lawsuit accuses the Defendants of omitting truthful information about Fastly’s retention of its increased market share, revenue growth, and ability to meet its 2024 revenue guidance from SEC filings and related material.
The information became clear on May 1, when the company’s Q1 FY24 results revealed disappointing metrics in contrast to management’s commentary during the previous quarter’s earnings call. The company’s revenues of $133.52 million missed the consensus by $0.35 million. What’s worse, Fastly drastically cut its revenue guidance for the full-year Fiscal 2024. The revised revenue range came down to between $555 million and $565 million from the prior outlook of $580 million and $590 million and also lagged the analysts’ estimates of $584.62 million.
Following the disappointing Q1 print, research firm Bank of America downgraded FSLY stock to Sell from Buy on May 2. The news sent Fastly shares crashing down 32% on the same day.
Fastly shares have plunged over 58% so far in 2024, causing massive damages to shareholders’ returns.
