The central theses
- Shares fell rapidly during Wednesday’s session after Credit Suisse downgraded the stock to neutral with a target price of $ 90.
- The analyst believes that margin pressures could hurt near-term results, but remains confident on the long-term picture.
- The neutral outlook suggests the stock could hover between $ 62.20 and $ 90.50 in the upcoming sessions until another catalyst shows up.
Analyst Brad Zelnick cited a balanced one Risk-reward ratio However, after Fastly Stock recovered from its recent pull-out, warnings that TikTok’s loss of traffic and the increase in traffic in the first half of 2020 could result in tough competitive conditions. Unused reserve capacities could exert pressure in the short term Gross margins in the coming quarters.
Despite those concerns, the analyst said the company still operates a unique developer-centric edge computing platform and that TikTok traffic could return to the platform if the risk of a US ban under the Trump administration subsides.
From a technical standpoint, after rallying in November, the stock moved from its reaction highs just below the 50-day moving average. The Relative Strength Index (RSI) appears neutral with a value of 52.05, but the moving average convergence divergence (MACD) is still in a bullish upswing – but below the zero line. These indicators suggest the stock may trend higher, but the medium-term trend remains at risk.
In technical analysis a reaction is a short-term trend reversal in the movement of the security price. Responses are most often associated with a downward movement in the price of a security after an upward movement, often in response to published news or data.
Traders should look out for consolidation Fibonacci Support levels at around $ 79.70 over the medium term before a possible resumption of the uptrend in Fastly stock. A rebound from these support levels could move towards the Fibonacci resistance levels of $ 90.50, but a breakdown from these levels could move towards previous lows of $ 62.20.
The bottom line
During Wednesday’s session, stocks fell rapidly after Credit Suisse downgraded the stock to neutral with a target price of $ 90.00. While the margin pressure could hurt in the next few quarters, the analyst remains optimistic for the long term. The stock could see a period of consolidation between highs of $ 90.50 and lows of $ 60.20.
The author has no position in the stocks mentioned, except through passively managed index funds.