The tech sector has grown significantly in recent years. However, despite strong demand, the industry is under pressure from macroeconomic headwinds and layoffs. Therefore, I think fundamentally weak stocks, Fastly, Inc. (FSLY) and BlackBerry Limited (BB), might be best avoided this week.
The global technology industry is experiencing a seismic transition, with issues ranging from economic downturns and supply chain interruptions to the emergence of ARM-based processes and the growing emphasis on sustainability.
We have seen an explosion in technology and connection over the last few decades. Our reliance on reliable networks and constant internet connection has become ingrained in our daily lives. As a result, network providers are under growing pressure to expand their infrastructure in order to satisfy the demands for next-generation networks.
Moreover, technology companies have increased the rate of layoffs in 2024 despite improving fundamentals. According to data provided by Layoffs.fyi, companies have laid off 262,682 employees in 2023, compared to 164,969 layoffs in 2022. In 2024, 35 tech companies have laid off 5,586 employees.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
Fastly, Inc. (FSLY)
FSLY operates an Infrastructure-as-a-Service edge cloud platform, which offers cloud computing, image optimization, security, edge computer technology, streaming solutions, and real-time content delivery network (CDN) services.
FSLY’s trailing-12-month levered FCF margin of 7.01% is 18.8% lower than the industry average of 8.64%. Its trailing-12-month asset turnover ratio of 0.27% is 55.7% lower than the industry average of 0.62%.
FSLY’s non-GAAP operating loss for its fiscal third quarter ended September 30, 2023, came in at $58.34 million. The company’s non-GAAP loss came in at $8 million. Also, its non-GAAP net loss per share came in at $0.06.
Also, its total operating expenses came in at $124.43 million increased 5.1% year-over-year.
Analysts expect FSLY’s EPS for the year ending December 31, 2024, came in at negative $0.01. Shares of FSLY has lost 5.6% over the past six months to close the last trading session at $17.80.
FSLY’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FSLY also has a D grade for Stability, Sentiment and Quality. It is ranked #120 out of 199 stocks in the Software - Application industry. Click here for the additional POWR Ratings for Growth, Value and Momentum for FSLY.
BlackBerry Limited (BB)
Headquartered in Waterloo, Canada, BB provides intelligent security software and services to enterprises and governments worldwide. It offers intelligent security software and services to enterprises and governments worldwide. The company operates through three segments: Cybersecurity, IoT, Licensing, and Other.
BB’s trailing-12-month CAPEX / Sales of 0.84% is 64.8% lower than the industry average of 2.39%. Its trailing-12-month asset turnover ratio of 0.46x is 25.5% lower than the industry average of 0.62x.
For the fiscal third quarter that ended November 30, 2023, BB’s revenue came in at $175 million. The company reported an operating loss and a loss before income taxes of $11 million and $6 million, respectively. Also, its net loss came in at $21 million, or $0.05 per share, respectively.
The consensus revenue estimate of $682.37 million for the year ending February 2025 represents a 17.8% decrease year-over-year. Its EPS is expected to decline 424.4% year-over-year to $0.01 for the same period. The stock has lost 30.3% over the past six months to close the last trading session at $3.39.
BB’s has an overall D rating, equating to a Sell in our POWR Ratings system.
It also has a D grade for Stability, Sentiment and Quality. It is ranked #35 out of 45 stocks in the Technology - Communication/Networking industry. Beyond what is stated above, we’ve also rated BB for Growth, Value and Momentum. Get all BB ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
FSLY shares fell $17.80 (-100.00%) in premarket trading Friday. Year-to-date, FSLY has gained 0.34%, versus a 0.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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