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Shareholders in Fastly (NYSE:FSLY) have lost 82%, as stock drops 17% this past week

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Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a Fastly, Inc. (NYSE:FSLY) shareholder over the last year, since the stock price plummeted 82% in that time. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We note that it has not been easy for shareholders over three years, either; the share price is down 47% in that time. Furthermore, it's down 40% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Since Fastly has shed US$261m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Fastly

Given that Fastly didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Fastly grew its revenue by 19% over the last year. That's definitely a respectable growth rate. Unfortunately, the market wanted something better, given it sent the share price 82% lower during the year. One fear might be that the company might be losing too much money and will need to raise more. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Fastly is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Fastly stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Fastly shareholders are down 82% for the year, falling short of the market return. The market shed around 21%, no doubt weighing on the stock price. Shareholders have lost 14% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Fastly you should know about.

Of course Fastly may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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