Class Action Lawsuit Against Fastly, Inc. (NYSE:FSLY)

A class action lawsuit has been filed against Fastly, Inc. (NYSE:FSLY) on May 24, 2024. The plaintiffs (shareholders) alleged that they purchased FSLY shares at artificially inflated prices between February 15, 2024 and May 1, 2024 (the lawsuit period) and are now seeking compensation for their financial losses. Investors who purchased Fastly shares during this period can click here to learn more about participating in the lawsuit.

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 quickly and at scale. Fastly also offers content delivery network (CDN) services that help companies deliver their content to end users.

Misleading claims by Fastly

Plaintiffs allege that Fastly and two of its executive 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.

According to the lawsuit, Fastly made high claims during the class period. For example, during the fourth quarter of fiscal 2023 earnings call, the company noted that its customer retention rates remained stable, with LTM NRR (trailing twelve month net retention rate) at 113%. At the same time, Fastly’s customer count increased sequentially by 141 to 3,243 in the fourth quarter, while increasing by 181 customers compared to the third quarter of fiscal 2023.

In addition, the CEO (individual respondent) stated that the growing customer base would contribute to the company’s revenues over the years. At the same time, these customers would help in spreading the revenues across different industries and improving profitability.

This is how the truth came to light

The lawsuit accuses the defendants of concealing truthful information from SEC filings and similar materials about whether Fastly can maintain its increased market share, revenue growth, and ability to achieve its 2024 revenue forecast.

The information became clear on May 1, when the company’s results for the first quarter of fiscal 2024 showed disappointing numbers, contrary to management’s comments during the previous quarter’s earnings call. The company’s revenue of $133.52 million missed the consensus by $0.35 million. Worse still, Fastly drastically lowered its revenue forecast for the full fiscal year 2024. The revised revenue range dropped from the previous forecast of $580 million to $590 million to $555 million to $565 million and also fell short of analysts’ estimates of $584.62 million.

Following disappointing first-quarter numbers, research firm Bank of America downgraded FSLY stock from “buy” to “sell” on May 2. This news caused Fastly shares to plummet 32% the same day.

Fastly shares have fallen over 58% so far in 2024, resulting in massive losses in shareholder returns.

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