• Wondering whether Fastly's recent ups and downs have left the stock overhyped or overlooked? This article focuses squarely on what you are paying for versus what you might be getting.
• Fastly's shares last closed at US$19.50, with sharp moves recently that include a 22.8% decline over 7 days and a 38.3% decline over 30 days, set against much stronger returns of 91.4% year to date and 155.9% over 1 year.
• Those swings have coincided with ongoing attention on Fastly's position in edge computing and content delivery, as investors reassess how its technology stack fits into broader internet infrastructure. Coverage has often focused on how the stock reacts to shifts in sentiment around growth-focused software companies, giving context to both the recent pullback and the strong 1 year return.
• Fastly currently has a valuation score of 2 out of 6, which means it screens as undervalued on 2 of the 6 checks used. Next, the article will compare different valuation approaches before finishing with a more complete way to think about what the stock might be worth.

Fastly scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Fastly Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting the company’s future cash flows and discounting them back to today’s value using a required rate of return.

For Fastly, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections expressed in $. The latest twelve month Free Cash Flow is reported at about $55.9 million. Analyst estimates are provided out to 2028, where Free Cash Flow is projected at $133.3 million, and Simply Wall St then extrapolates the figures further out to 2035, with each future year discounted back to a present value.

Combining these discounted cash flows produces an estimated intrinsic value of about $24.69 per share. Compared with the recent share price of $19.50, the DCF implies the stock trades at a 21.0% discount, suggesting it screens as undervalued on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Fastly is undervalued by 21.0%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

Approach 2: Fastly Price vs Sales

Price to Sales, or P/S, is often useful for valuing companies that are not reporting consistent profits but do have revenue, because it focuses on what investors are paying for each dollar of sales rather than earnings that may be volatile or negative.

In general, higher growth expectations and lower perceived risk can support a higher “normal” P/S ratio, while slower expected growth or higher risk usually align with a lower multiple. For Fastly, the current P/S ratio is 4.68x. That sits above the wider IT industry average of 2.11x and also above the peer average of 3.18x.

Simply Wall St’s Fair Ratio for Fastly is 4.02x. This is a proprietary estimate of what a reasonable P/S might be given factors such as earnings growth, industry, profit margin, market cap and company specific risks. It is designed to be more tailored than a simple comparison against industry or peer averages because it attempts to line up the multiple with the company’s own profile rather than a broad group.

Comparing the Fair Ratio of 4.02x with the current P/S of 4.68x suggests the stock screens as overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Fastly Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way to connect a clear story about Fastly with concrete numbers like revenue, earnings, margins and a fair value estimate. You can then compare that fair value with the current price to decide whether the stock looks attractive or stretched. All of this is available inside Simply Wall St's Community page, where Narratives are available to millions of investors, refresh automatically when new news or earnings arrive, and can span a wide range of views, from a very cautious fair value of about US$4.97 per share to more constructive assessments around US$20. This shows how different investors can use the same company data to build very different but fully quantified stories.

For Fastly, however, we will make it really easy for you with previews of two leading Fastly Narratives:

Fair value in this bullish narrative: US$20.00 per share

Implied discount versus the recent US$19.50 price: about 2.5% below this fair value

Revenue growth assumption in this narrative: 12.39% a year

• Relies on multi year, high commitment contracts and cross selling to support higher revenue visibility and potential margin improvement.
• Assumes profit margins could move from a loss toward an 8.19% level over time, with earnings of US$72.6m and a P/E of 63.0x used to support the US$20.00 fair value, discounted at 9.32%.
• Highlights risks from commoditisation, customer concentration, competition, persistent operating losses and rising compliance and infrastructure costs that could limit earnings progress.

Fair value in this more cautious narrative: US$4.97 per share

Implied premium versus the recent US$19.50 price: about 293% above this fair value

Revenue growth assumption in this narrative: 9.93% a year

• Frames Fastly as a stock where the story around AI and edge computing could spread faster than the fundamentals underpinning that narrative.
• Points out that the share price has already been through a prior boom and pullback, with attention on how much investor enthusiasm is already reflected in the current valuation.
• Flags that broader themes such as geopolitics, sector rotation and where capital flows next could all matter for how durable the current enthusiasm around Fastly really is.

If you want to see how other investors are joining these dots and what assumptions sit behind their views on Fastly, it is worth reading the full narratives, including the other two that are not shown here. This can help you stress test your own stance against a wider range of outcomes.

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Fastly on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for Fastly? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.