Buying NET shares now depends on your faith in his vision
As a specialist in content delivery networks (CDNs) and cybersecurity, Cloudflare (NYSE:REPORT) stock was always going to be a relevant game on paper.
But when the new coronavirus abruptly made its appearance, the NET stock suddenly took on a much greater importance. This particular sentiment has only grown stronger, placing investors in a classic dilemma: buy now or wait for the speculative storm?
Due to the far-reaching implications of the Covid-19 crisis, it’s easy to see why many daring investors have invested their funds in NET stocks. As the global health crisis has forced worker bees out of their corporate hives and into their individual nests, demand for data has spread from high-capacity focal points to living rooms across the country.
Thanks to the nature of CDNs, which essentially match data to the source of demand, NET inventory has thrived. Plus, CDNs weren’t just useful for business purposes. Indeed, while people are forced to switch to home entertainment due to the loss of other in-person options, companies like Netflix (NASDAQ:NFLX) experienced unprecedented peaks in demand.
Thus, more and more people have paid attention to CDNs and their importance to the functioning of the Internet, just as people are currently receiving training on. supply chain disruptions. Additionally, with so many people reliant on connectivity technologies, Cloudflare’s cybersecurity solutions – especially for its Distributed Denial of Service (DDoS) mitigations – have garnered increased interest.
But with companies gradually returning to normal, is there a longer-term rationale for NET stock, especially at its skyrocketing price? As our own Dana Blankenhorn explained, the real value of Cloudflare lies in its Web 3.0 protocol.
“This means that the content doesn’t have to sit in a Amazon (NASDAQ:AMZN) Web server, chargeable a big balance sheet to export. It can live anywhere. Amazon calls its storage service S3. Cloudflare calls its R2 service, and that disrupts the disruptor.
Is the next generation of the internet the key to NET stock?
My Investor place A colleague further stated that “Cloudflare gives customers pricing power over the most profitable cloud businesses. It also gives the edge of the network core power. In essence, the big boys cannot ruthlessly monopolize the vital CDN industry. By decentralizing power away from centralized sources, the society behind NET actions can do a lot of good for everyone.
If that didn’t get you excited about the prospects for Cloudflare, Blankenhorn explained as such. “The last higher move in Cloudflare happened at the same time You’re here (NASDAQ:TSLA) has climbed to a market cap of $ 1 trillion and it’s very loosely related. Just like Tesla disrupted the auto market, Cloudflare disrupted the cloud with R2.
Sounds like a compelling story to me? But as Blankenhorn himself admitted, it’s an open question whether NET stock is worth 100 times sales.
To answer this question, you need to individually assess whether associating Cloudflare with Web 3.0 will be relevant enough. By the nature of the business, it is possible that the disruptor of the disruptor is himself / herself disturbed. Thanks to the evolution of technology, no one can truly be considered a supreme predator.
That aside, investors may have to ask themselves a bigger question: Will Web 3.0 materialize as we imagine it? Right now, the concept of decentralized frictionless protocols – what Blankenhorn calls a cloudless cloud – is appealing because of cryptocurrencies. However, decentralization creates its own problems, as I have argued in the past.
As a transactional network, decentralized protocols are much cheaper than centralized bank transfers. But one of the risks is losing the security of centralized mechanisms: you have no one to complain to if something goes wrong.
So it is with decentralized web applications. Without gatekeepers, content users might not have adequate recourse if something goes wrong, which invariably happens.
The possibility of discount
If you’re like me, you hate buying stocks in force. With NET stock rising over 45% over the past month, it’s hard to justify taking a photo here. But then, my colleague asks a probing question: what if the trough never happens?
That’s of course your million dollar question. If you believe in the strengths of its current business applications and the future of Web 3.0 (and how Cloudflare will have a driving influence), then 100x sales for NET stock could be cheap. If the business slips, however, you could buy a big mistake.
Personally – and it’s just me thinking out loud – the amount of sustained speculation makes me suspicious. If the music ever stops (or darkens a bit), you imagine overvalued assets like NET stocks will suffer a big correction.
But the music didn’t stop, triggering a storyline this time it’s different. Honestly, it will depend on how confident you are in Cloudflare’s long-term trajectory.
As of publication date, Josh Enomoto did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Former senior business analyst for Sony Electronics, Josh Enomoto has helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided unique and essential information for the investment markets, as well as for various other sectors, including law, construction management and health.