• Wondering whether Fastly's current share price still makes sense after a big run, or if the stock is already pricing in too much optimism.
• The stock closed at US$19.08, with a 16.9% gain over the last 7 days, a 32.0% decline over the past month, an 87.2% gain year to date, a 156.1% gain over 1 year, a 15.9% gain over 3 years, and a 62.4% decline over 5 years. This mix can change how you think about both risk and opportunity.
• Recent coverage has focused on Fastly's role in edge computing and content delivery, and how its position in these markets could influence future demand for its services. Other commentary has highlighted how shifts in investor sentiment around growth oriented software stocks may be feeding into Fastly's share price swings.
• Fastly currently has a valuation score of 2 out of 6. The rest of this article will walk through traditional valuation approaches before finishing with a different way of thinking 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 model estimates what a stock could be worth by projecting future cash flows and discounting them back to today’s value using a required return. For Fastly, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows available to shareholders.

Fastly’s latest twelve month Free Cash Flow is about $55.9 million. Analyst and extrapolated projections suggest Free Cash Flow could reach around $321.4 million in 2035, with intermediate years such as 2026, 2028 and 2031 sitting between these points. Simply Wall St uses analyst estimates up to 2028, then extends the series with its own growth assumptions to build a 10 year cash flow path.

Discounting those projected cash flows produces an estimated intrinsic value of about $24.14 per share. Against the recent share price of $19.08, this implies the stock trades at roughly a 21.0% discount to that DCF estimate, which indicates that Fastly appears undervalued on this model alone.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Fastly is undervalued by 21.0%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Approach 2: Fastly Price vs Sales (P/S)

For companies where earnings are limited or volatile, the Price to Sales ratio is often a more practical yardstick because revenue is typically more stable than profit and less affected by accounting choices.

In general, higher growth expectations and lower perceived risk can justify a higher “normal” P/S multiple, while slower growth or higher risk usually means a lower P/S is more appropriate. The raw multiple therefore only really means something when you compare it with sensible benchmarks.

Fastly currently trades on a P/S ratio of 4.58x. This sits above both the IT industry average of 2.29x and the peer group average of 2.51x, which might initially make the stock look expensive. However, Simply Wall St’s Fair Ratio for Fastly is 3.18x, which reflects factors such as earnings growth expectations, industry, profit margins, market cap and risk profile. This Fair Ratio is often more useful than a simple peer or industry comparison because it adjusts for the company’s specific characteristics rather than treating all stocks as alike.

Comparing Fastly’s current 4.58x P/S to the 3.18x Fair Ratio suggests the stock is pricing in more optimism than this framework would imply.

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, and on Simply Wall St this comes through Narratives. You outline your view of Fastly’s story, link it to your own revenue, earnings and margin assumptions, and the platform turns that into a Fair Value that you can compare with the current share price to help decide whether to act. It then automatically refreshes your view as new news or earnings arrive. On the Community page, you might see one investor building a bullish Fastly Narrative that supports a Fair Value near the higher analyst target of about US$32.00, while another builds a cautious Narrative closer to the lower end around US$7.00. Both are valid as long as the story, forecast and valuation hang together.

For Fastly, here are previews of two leading Fastly narratives:

Narrative fair value: US$24.11 per share

Gap to current price on this view: Fastly trades at about 20.8% below this fair value estimate

Revenue growth used in this narrative: 11.21% a year

• Highlights growth in higher margin security and edge computing products, combined with cross selling, as key drivers of stronger customer retention and revenue per customer.
• Points to a broader enterprise and international focus and tighter cost control as reasons to expect a more diversified, recurring revenue base and improving margins over time.
• Frames analyst price targets around US$24.11 as relying on meaningful earnings improvement, a higher future P/E multiple and ongoing investment, while also flagging competition, customer concentration and regulation as important risks to watch.

Narrative fair value: US$4.97 per share

Gap to current price on this view: Fastly trades at about 284.0% above this fair value estimate

Revenue growth used in this narrative: 9.93% a year

• Argues that once a story about a stock becomes widely accepted, much of the potential can already be reflected in the share price, using Fastly's edge computing and AI related appeal as an example.
• Notes that Fastly has already been through a sharp boom and pullback, with the current setup viewed through the lens of past trading swings and technical interest around levels near US$19.
• Emphasizes that wider macro and sector themes, including investor focus on other areas such as defense and energy, could limit how far Fastly's current narrative can carry the stock.

If you want to see how other investors are joining the debate and build a version that matches your own assumptions, you can start by reading these Fastly narratives in full and then tweak the numbers to reflect your view of the risks and rewards.

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.