Investment idea about Fastly(FSLY) and Cloudflare(NET) — this article haven’t finished
Actually Cloudflare is more focus on security and Fastly is on CDN. But both of these business are on their product portfolio.
- Fastly is projected to outpace Cloudflare by growing at ~32.2% CAGR versus Cloudflare’s expected growth rate of ~30.9% over the next three years.
- And GM of NET is almost 77%-79% and FSLY is about 56%–57%, NET is better investment? It is not the case.
We should know that NET has significant number of free user, however, NET allocate free user cost into Selling and marketing expense, that means COGS will be smaller and GM bigger. Although NET clarify if they allocate free users’s cost into COGS, their GM is still above 70% and they do put depr. exp. into COGS. And let’s turn into FSLY. fastly COGS consist of bandwith, peering and co-location fees, SBC, depreciation of network equipment and amortization of capitalied internal-user software. So. it is not a good choice when we compare these two companies’s gross margin to be a investment thesis. (by the way Akamai COGS include network bandwith costs relating to serving internet traffic except for depre. expense and amortization.)
- TAM of FSLY and NET
we can know from the following two graphs, showing that TAM of FSLY and NET to attain $35.4B and $47B in 2022. This means NET have bigger product portfolio in their pocket, though FSLY now is really aggressively developed new products. And when we talked about net retention rate of them, fastly nailed it easily with 130% over 115% of NET. But we should know the TA of them are also different. Fastly aim at large and Mega-enterprise more focus on developer-first platform and Cloudflare is focus on both large enterprise and small to medium size companies, so I will say it is normal when we see these kinds of rate of retention difference. And due to what I just mentioned Fastly is more focus on developer-first platform, it also means its retention rate will decelerate when the accessible enterprise market is saturate.
- No matter we use PE or PS multiple to valuate these two stocks, $NET show some opportunities there, if the market capital start to shift their attention to other sectors, then it might be a good chance for step into NET.
Source : https://seekingalpha.com/article/4358281-fastly-vs-cloudflare-you-must-buy-this-one
Tech terminology:
WAF : A web application firewall (or WAF) filters, monitors, and blocks HTTP traffic to and from a web application. A WAF is differentiated from a regular firewall in that a WAF is able to filter the content of specific web applications while regular firewalls serve as a safety gate between servers. By inspecting HTTP traffic, it can prevent attacks stemming from web application security flaws, such as SQL injection, cross-site scripting (XSS), file inclusion, and security misconfigurations.[1
Bot detection : Real-Time Bot Detection. Machine Learning Bot Detection Adapts to Your Traffic to Prevent Non-Human Behavior. Cybercriminals, fraudsters and even competitors use bots to do their evil bidding.
Turnkey solution is a type of system that can be easily implemented into current business processes. A turnkey solution is immediately ready to use upon implementation and is designed to fulfill a certain process such as billing, website design, training or content management
