Fastly (FSLY  ) was one of the best-performing stocks this year. From the March low to its peak in mid-October, Fastly gained nearly 1,200%. However from this high, Fastly is down by 50% in the past couple of weeks.

The company's initial strength this year was due to the explosion in spending and demand for cloud services. Fastly is in the content distribution and edge-computing which means that it helps companies deliver content to users. Its biggest customer is TikTok, and it benefitted from that company's extraordinary growth. Now, it's being hurt by that company's decreased traffic.

Inside the Numbers

In the third quarter, Fastly generated revenue of $71 million which was a 42% increase from last year and a net loss of $0.04 per share. Both the top and bottom-line fell short of analysts' expectations.

In total, the company's number of customers increased to 2,047 from 1,951 in the previous quarter. Its enterprise customers made up 88% of total revenue. The average enterprise customer spending was $753,000 a modest increase from $716,000 in the previous quarter.

Fastly's stock fell 30% in mid-October, when it warned about lower traffic from its largest customer -TikTok due to the U.S. ban hurting user growth, and it expects traffic to continue declining in the fourth quarter.

In the next quarter, Fastly expects revenue between $80 million and $84 million. It expects a loss of between $0.08 and $0.12. Analysts were looking for Q4 revenue of $83.1 million, which would be 41% higher than 2019 Q4. Analysts were looking for a loss of $0.02 per share.

For the full year, Fastly expects 2020 revenue between $288.2 million and $292.2 million which is a downgrade from the previous guidance of $290 million to $300 million.

Stock Price Impact

Fastly's rapid rise and massive tumble in 2020 shows the inherent risks and upside of growth stocks. The company fell short of revenue expectations by less than $3 million, but it caused a more than 50% decline.

Despite this fall, Fastly's stock remains overvalued by many traditional metrics. It has a price to sales ratio of 26, and it's not expected to become profitable until 2022. Over the last 12 months, it's generated $267 million in sales and has gross margins of 58%.

Many investors in Fastly were expecting revenue growth to continue accelerating. Management's early warning about earnings and the conference call make it clear its peaked in terms of growth rate.