Cloudflare (NET) shares fall as the market gains: what you need to know

VSloudflare (NET) closed at $48.65 last trading session, marking a -0.06% move from the previous day. That move lagged the S&P 500’s 1.21% daily gain. Elsewhere, the Dow gained 1.03%, while the tech-heavy Nasdaq gained 0.16%.

Today, shares of the web security and content delivery company have gained 6.13% over the past month. Over the same period, the IT & Technology sector gained 2.22%, while the S&P 500 gained 3.2%.

Wall Street will be looking for positivity from Cloudflare as it nears its next earnings report date. That is expected to be August 4, 2022. In this report, analysts expect Cloudflare to post earnings of -$0.01 per share. This would mark 50% year-over-year growth. Our most recent consensus estimate calls for quarterly revenue of $227.52 million, up 49.26% from the prior year period.

NET’s full-year Zacks consensus estimates call for earnings of $0.03 per share and revenue of $956.04 million. These results would represent year-over-year variations of +160% and +45.64%, respectively.

Any recent changes in analyst estimates for Cloudflare should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term trading trends. Therefore, we can interpret positive estimate revisions as a good sign for the company’s business outlook.

Research indicates that these revisions to estimates are directly correlated to near-term stock price dynamics. Investors can take advantage of this by using the Zacks ranking. This model accounts for these estimation changes and provides a simple and actionable scoring system.

The Zacks ranking system ranges from #1 (strong buy) to #5 (strong sell). It has a remarkable track record of third-party audited success, with #1 stocks offering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has fallen 0.3% . Cloudflare is currently a Zacks Rank #4 (sell).

Valuation is also important, so investors should note that Cloudflare has a Forward P/E ratio of 1947.2 at this time. For comparison, its industry has an average Forward P/E of 43.37, which means Cloudflare is trading at a premium to the group.

Investors should also note that NET has a PEG ratio of 77.89 at this time. The PEG ratio is similar to the widely used P/E ratio, but this measure also takes into account the company’s expected earnings growth rate. Internet – Software held an average PEG ratio of 2.32 at yesterday’s closing price.

The Internet – Software industry is part of the IT and technology sector. This industry currently has a Zacks Industry Rank of 153, which places it in the bottom 40% of all 250+ industries.

The Zacks Industry Ranking assesses the strength of our industry groups by measuring the average Zacks Ranking of individual stocks within the groups. Our research shows that the top 50% of industries outperform the bottom half by a factor of 2 to 1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Ann J. Cox