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

In the last trading session, Cloudflare (NET) closed at $50.35, marking a -0.3% move from the previous day. This change lagged the S&P 500’s 0.36% gain on the day. Meanwhile, the Dow Jones gained 0.23% and the tech-heavy Nasdaq lost 0.1%.

Prior to today’s trading, shares of the web security and content delivery company were down 7.73% in the past month. This was lower than the IT & Technology sector’s loss of 6.98% and the S&P 500’s loss of 6.59% during this period.

Cloudflare will be looking to show strength heading into its next earnings release. The company is expected to post EPS of -$0.01, up 50% from the prior year quarter. Meanwhile, our latest consensus estimate calls for revenue of $227.48 million, up 49.23% from the prior year quarter.

For the full year, our Zacks consensus estimates call for earnings of $0.03 per share and revenue of $956.16 million, which would represent swings of +160% and +45.66%, respectively, compared to the previous year.

Investors might also notice recent changes in analyst estimates for Cloudflare. These revisions generally reflect the latest short-term trading trends, which may change frequently. Thus, positive revisions to estimates reflect analysts’ optimism about the company’s business and profitability.

Based on our research, we believe that these estimate revisions are directly related to the team’s close stock movements. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes into account these estimation changes and provides a clear and actionable scoring model.

The Zacks ranking system ranges from #1 (strong buy) to #5 (strong sell). It has a remarkable, externally audited track record of success, with No. 1 stocks delivering an average annual return of +25% since 1988. Over the past month, Zacks Consensus’ EPS estimate has remained stagnant. Cloudflare currently sports a Zacks rank of #3 (Hold).

In terms of valuation, Cloudflare is currently trading at a Forward P/E ratio of 1923.81. This represents a premium to its industry average Forward P/E of 45.23.

It should also be noted that NET currently has a PEG ratio of 76.95. This measure is used in the same way as the famous P/E ratio, but the PEG ratio also takes into account the growth rate of the stock’s expected earnings. The Internet – Software industry currently had an average PEG ratio of 2.52 at yesterday’s close.

The Internet – Software industry is part of the IT and technology sector. This industry currently has a Zacks Industry Rank of 155, which places it in the bottom 39% 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.

Be sure to track all of these stock movement metrics, and more, at Zacks.com.

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Ann J. Cox