NET stock keeps increasing. Is it too late to invest?
Cloudflare (NYSE:REPORT) continues to be a favorite summer target for tech investors. After net equity growth plateaued in the spring, it caught fire again in May. Since the middle of the month, shares of CDN (content delivery network) and internet security provider have risen 83% in value. Although the pace has increased, NET’s growth trajectory has been in place since the company went public in 2019. In just under two years since, NET stock has returned 565%.
The question now is whether it is too late to embark.
CDN providers like Cloudflare are a big part of what we experience on the web and with internet dependent services like online shopping, video streaming, video calling, and social media. CDNs operate regional data centers which reduce website response time and provide increased security. The demand for CDN service has grown rapidly during the pandemic, and is poised to continue to grow.
Worth $ 14.4 billion in 2020, the global CDN market is expected to reach $ 27.9 billion by 2025. This bodes well for Cloudflare and sets the stage for NET stock to generate long-term growth.
Second Quarter Results Show Cloudflare’s Momentum Continues
August 5, Cloudflare released its second quarter results. After adding a record 140 large customers (those who pay more than $ 100,000 per year), it now has 1,088 at this level. At the end of the quarter, Cloudflare had 126,735 paying customers in total. The company also has millions of customers using its free services.
This free tier is important for future growth. As businesses move beyond the free tier, there’s a good chance they’ll upgrade to a paid version of a service they’re already familiar with rather than move to a new provider.
The results helped maintain the momentum of a growth sequence that began in May.
The CEO of the company couldn’t have sounded more elated when he summed up Cloudflare’s performance:
“We had our best quarter as a public company and our revenue growth continued to accelerate, growing 53% year-over-year. We also added a record number of large clients, signing the equivalent of more than two six-figure clients every business day in the second quarter.
Analysts believe NET stock still has room to grow
The performance of the NET share in 2021 raises questions about the sustainability of the momentum. How long can this growth continue? Investment analysts are bullish on the stock, although most predict the pace of growth will slow.
To look at analyst activity in August, there were notable improvements in the wake of the company’s second quarter earnings. For example, Argus and Needham & Company already had NET shares classified as “buy,” but both raised their price targets to $ 140. Cowen, who has NET rated as “outperforming,” increased his price target from $ 124 to $ 135. Not all is well – Robert W. Baird downgraded stocks from “outperform” to “neutral” – but Cloudflare sentiment remains broadly positive.
Among the 17 analysts surveyed by the the Wall Street newspaper, NET has a consensus rating of “Overweight”, with an average target price of $ 124.79.
At this point, the NET stock gets a “B” rating in Portfolio filing cabinet.
Net result on NET stock
In addition to its importance as a CDN, Cloudflare also plays a central role in the growing Internet of Things (IoT) market. Billions of unsecured connected devices are at risk of being used in DDoS attacks to cripple websites and Internet services. The breakdowns have impacted some of the world’s biggest tech companies, resulting in an increase in the demand for the solution. Cloudflare plays a critical role in defending against these attacks.
This makes NET even more attractive. It’s not only going to continue to benefit from the continued reliance on CDNs, it’s also an IoT stock. I wouldn’t give Cloudflare stocks much of a chance to maintain the blistering 83% pace they’ve set since mid-May. However, this is a company that is a leader in hot industries which are expected to see demand continue to grow. This is a recipe for the long-term growth of NET stocks, even though the days of big and rapid gains are over for now.
As of the publication date, Louis Navellier had a long position on NET. Louis Navellier had (directly or indirectly) no other position on the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article did not hold (directly or indirectly) any positions in any of the securities mentioned in this article.
The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
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