Fastly, Inc.

FSLY Details

Fastly, Inc. (NYSE: FSLY) develops an edge cloud platform, an emerging infrastructure as a service (IaaS) category that allows developers to create, secure, and deliver digital experiences. FSLY operates a content delivery network (CDN), enabling companies to provide more dependable and faster internet content. It allows users to program on its platform rather than just storing static content, enabling edge computing and improved processing of more dynamic content.

Latest News:

• Breakthrough Achievement in App and API Protection: OnJuly 28, 2021, FSLY launched the beta version of the Signal Sciences agent on its Fastly edge cloud platform. This marks a huge step forward in FSLY's objective to help developers protect their apps and APIs in any situation. Customers can now leverage advanced signal technology to create and release real-time rules to recognize suspicious requests and block attacks faster.

H1FY21 Results:

• Significant Growth in Revenue: The company reported a 23.47% rise in revenues to USD 169.88 million during H1FY21 (ended June 30, 2021), compared to USD 137.59 million during H1FY20, attributable to the acquisition of Signal Sciences Corp. in Q4FY20 and the adoption of modern edge platforms and products.
• Surge in Net Losses: Its net loss in H1FY21 increased to USD 108.98 million from USD 26.45 million reported in H1FY20.
• Cash and Debt Position: As of June 30, 2021, FSLY had cash and cash equivalents (including marketable securities) of USD 929.73 million and total debt of USD 965.84 million.

Key Risks:

• Customer Concentration Risk: FSLY derives most of its revenue from a limited number of customers and industries, such as media and entertainment. For the trailing 12 months (TTM) ended June 30, 2021, it's top ten and five customers accounted for 35% and 23% of the revenue, respectively. Hence, the loss of any such key customer could hurt the company's financials.

Outlook:

• Q3FY21 Estimate: FSLY expects to generate revenue in the range of USD 82 – 85 million in Q3FY21, with a non-GAAP operating loss of USD 19 – 23 million. It also estimates a non-GAAP net loss per share of USD 0.18 – 0.21.
• FY21 Estimate: Its FY21 revenue range is expected to be USD 340 – 350 million with a non-GAAP operating loss of USD 65 – 75 million and a non-GAAP net loss per share of USD 0.57 – 0.65.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FSLY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FSLY's stock price has increased 13.19% in the past month and is currently leaning towards the lower end of its 52-week range of USD 33.87 to USD 122.75. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 60.92. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 43.22.

Considering the uptick in the stock price in a short period, negative ROE, and no visibility into profitability, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 48.41 as of October 27, 2021, 3:44 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Corecivic, Inc.

CXW Details

Corecivic, Inc. (NYSE: CXW) operates as a diversified government solutions company, which provides partnership correctional, detention, and residential reentry facilities and operates prisons in the US. Its operating segments include 1) CoreCivic Safety, which operates 47 correctional and detention facilities, with a total design capacity of ~70,000 beds; 2) CoreCivic Community, operating 26 residential reentry centers with a total design capacity of ~5,000 beds; and 3) CoreCivic Properties, which holds ten properties, totaling 1.6 million sq. ft, that are leased to third parties and used by government organizations as of June 30, 2021.

Latest News:

• USD 225 Million Notes Offering: On September 29, 2021, CXW announced the closing of a tack-on public offering of USD 225.0 million aggregate principal amount of 8.25% senior unsecured notes due 2026. The notes are unsecured obligations of the company and are guaranteed on a full and unconditional basis.

Q2FY21 Results:

• Decline in Revenues: CXW's revenues declined by 1.71% to USD 464.57 million in Q2FY21 (ended June 30, 2021) from USD 472.64 million in Q2FY20, owing to an 8.01% decrease in the average daily compensated population (53,610 during Q2FY21 vs. 58,280 during Q2FY20).
• Lower Net Income: The Q2FY21 net income (attributable to common stockholders) was USD 15.62 million, lower than USD 22.19 million reported in Q2FY20, representing a diluted EPS of USD 0.13.
• Leveraged Balance Sheet: The company exited the quarter with a cash balance of USD 162.89 million and total debt of USD 1.51 billion.

Key Risks:

• Customer Concentration Risk: During Q2FY21 and Q2FY20, CXW generated 57% and 52%, respectively, of the total revenues from sales to its federal customers (primarily comprising ICE, the USMS, and the BOP) in the Safety and Community segments. Hence, the loss of or a significant reduction in these sales could adversely impact the company's financials.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CXW Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CXW's stock price has increased 41.00% in the past twelve months and is currently leaning towards the lower end of its 52-week range of USD 5.76 to USD 12.35. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 31.31. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.01.

Considering the significant uptick in the stock price, leveraged balance sheet, and associated risks, we believe the business fundamentals are sufficiently reflected in the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 8.46, down 0.12% as of October 27, 2021, 11:41 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.