Thread by @InvestiAnalyst

$FSLY is cheap.

At EV/S of 14x, $FSLY trades as a value stock. Why?

After spending a week carefully analyzing the company's tech and their report. There are metrics the headlines won't tell you.

Here are 10 reasons why I think $FSLY could offer a deal for long-term Investors:

0/ First, Why the -40% drop:

i) Q2 Guidance was weak - didn't show any QoQ growth

ii) CFO Ousted

iii) Lack of momentum from a product innovation standpoint relative to $NET

iv) Retention slowed

Now my reasons below.. Investors need to know Q2 is seasonally not good for $FSLY

1/ Record customer addition in Q1:

$FSLY did something right in Q4/Q1 to attract customers

In Q1:
+ Record Net Add of +123 clients.
+ Record Avg. contract value at $159K
+ Avg. Enterprise spend of $800K

Highest ever client add + growth rate below ⬇️ (data h/t @investing_city)

2/ Retention metrics:

These newly added customers are staying. The product is showing signs of stickiness.

DBNER @ 139% (Though slightly lower than the record of 147% of Q3 2020)

NRR: 107%

LTM NRR: 133% (same story)

Yes, there's a deceleration, but clients are still staying.

3/ FY 2021 Raised:

$FSLY actually raised revenue guidance for the entire year
to $380-390M meaning $FSLY could grow 35% YoY

They're expecting momentum in the back half of 2021.

Historically, due to the nature of their client base like eCommerce. They performs well in H2

4/ New CFO:

Critically finding a new CFO could actually be a good thing for $FSLY long-term.

If they can find someone to properly integrate the subscription model from Signal sciences + their usage based model and effectively attract/cross-sell customers.

This could be huge.

Stock Catalyst

5/ If Q2/Q3 results turn out to surprise & show a huge beat which is very possible - this could turn the course for $FSLY shares (obviously excluding any external factors like rates, $QQQ etc.).

I'll also note due to their usage based B-model, Q2 is a tough comps

6/ Full release of Compute@Edge (yea, I know customers are using it) -

But from what I hear, market is expecting more innovation & a comprehensive Edge, similar to what $NET did

I expect $FSLY is critically thinking about utilizing their $1B cash. I expect something here by Q3!

7/ Additional component to Compute@Edge could lead to adding a new premium customer in eCommerce or Media biz that can fill the gap from TikTok.

$FSLY still retains some of the world's biggest brand today, don't forget.

This is speculative, but I expect $FSLY adding a big one..

8/ AP Usage Stats:

I found this piece today from @OphirGottlieb

Application Performance Usage Distribution on the Entire Internet.

$FSLY leading here due to the nature of their platform in helping enterprise APM's... interesting

https://twitter.com/OphirGottlieb/status/1394660806671802377

9/Platform:

The more I've dug into $FSLY - I've learned they have a special security product in Signal Sciences. They still have one of the fastest CDN edge.

SS offers an advanced, next-gen WAF security that ensures applications are secure on the cloud. It could challenge $NET

10/ Valuation:

If most of my points above hold true.

It's not impossible to see $FSLY growing 40% CAGR over the nxt 5-yrs.

At $43, $FSLY trades for roughly EV/S 15x

I can see a good R/R or a 30% CAGR stock return over the next 3-years especially as Edge gains more traction.

END/ $FSLY's Advantage:

1) Speed of their CDN/Edge
2) Developer focused
3) Security with SS

Edge TAM is growing >30% CAGR

They just need to capitalize on these advantages to attract customers and secondly, build & innovate as rapidly as $NET does.

There is no winner take all

Happy to hear from people who are or were previously long $FSLY

Cc: @OphirGottlieb @dhaval_kotecha @plantmath1 @RedCoatChicago - what could I be missing?

From our convo last week; Feel free to chip-in @hhhypergrowth @FromValue

Disclosure: I don't own shares yet, but doing DD.

I'll make it clear though - Yes, there are a couple of risk factors in the short-term especially relative to $NET, but over the long-term, I could see Joshua Bixby turning things around.

I'll love to hear from any followers who are long and what's your thought process. Thanks.