Why investors slammed stocks fast on Tuesday

Rapid (FSLY -5.15%) has had very little news of his own to share in recent weeks. On Tuesday, however, its shares made a notable move after an analyst downgraded his recommendation on the company.

Based on this development, investors eagerly dumped the company, causing it to close over 5% lower on the day. This was a much steeper fall than that S&P 500 decrease of the index by 0.9%.

No longer a strong buy

The expert became considerably more bearish Raymond Jamesto Frank Louthan IV; before the market opened, he changed his recommendation on Fastly stock to market perform (hold, in other words) from previous strong buy.

Noting that the stock is nearing its previous price target of $8, Louthan wrote in a new research note that “we believe there are better growth opportunities elsewhere in our coverage, particularly data centers and larger carriers.” .

The analyst noted that while Fastly’s recent “repositioning” of its business and its expanded product lineup are positive developments, it could take several quarters for such efforts to affect fundamentals. He singled out earnings and free cash flow (FCF) as possible beneficiaries of that potential improvement.

Experts are not particularly excited about the future

All in all, analysts following Fastly stock are pretty cool about the company’s outlook. Collectively, they expect no improvement in the company’s net loss in the third quarter compared to the year-ago period. The downside, the consensus forecast for the full-year net loss is only slightly narrower ($0.15 vs. $0.17 per share) than the 2023 result. Meanwhile, annual revenue growth for both years should fall below 6 %.