NET Stock’s third quarter results show it’s still a high-growth stock

While slowing down in recent days, the Cloudflare (NYSE:REPORT) the rally that started in October continued into this month. Initially triggered by the Facebook (NASDAQ:FB) Outage early last month, the extended surge sent over 71% of NET shares in just over a month, dropping from around $ 115.75 per share to around $ 200 per share today.

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A solid quarterly results report, released on November 4, shows that Cloudflare is beating estimates in terms of revenue and profit. This content delivery, online security and web infrastructure company has once again shown that this is a real growth story.

However, it now appears that this latest execution is slowing down. Some who returned a few months ago at lower prices seem to be selling out. Others may delay the purchase, waiting for further weakness.

So, as it begins to play out, what’s the best approach?

Yes, Cloudflare’s days of delivering jaw-dropping annual returns may be behind that. Considering that its share price has increased by around 200% over the past 12 months, and around ten times since the start of the Covid-19 pandemic. I wouldn’t expect its price to double or triple anytime soon.

However, if you are looking for long-term growth, this should lead to more modest, but nonetheless strong returns going forward. Then you might want to buy NET shares.

NET Stock and its latest earnings report

For the quarter ending September 30, Cloudflare still exceeded estimates. With both its results above and below. Generator $ 172.3 million in revenue in the quarter (up 51% year-over-year), it topped analysts’ estimates, calling for $ 165.7 million in sales.

Pessimistic analysts had predicted that NET stock would post quarterly losses of 4 cents per share. Instead, the company generated breakeven earnings per share (EPS), which may indicate that it is on the verge of breaking out of the red and reaching steady profitability.

Along with its profits, Cloudflare also raised its annual forecast for 2021. Previously, it expected to generate between $ 629 million and $ 633 million in sales this year. Now, the cloud service provider is forecasting sales of between $ 647 million and $ 648 million. Added scores of new large customers (170 to be exact), it is not surprising how this company has once again surpassed the high expectations of investors.

With its multi-month rally stalling, it’s understandable that you think it’s too late to get into position. Especially since the title sports the overpriced label. His days of rapid movement may be over. But there is still a lot on the table to make this a worthwhile long-term buy at current prices.

Assessment and prospect of progressive gains to come

There is no denying that NET stocks are trading at a rich valuation. At today’s prices, stocks are trading for about 100 times the estimated income for 2021 and 76 times the estimated income for 2022. It’s expensive. Even for a fast growing tech name.

Having said that, it is wrong to think that “overvalued” means “a bubble ready to burst”.

A rich valuation alone does not always cause an eventual price collapse. As long as the conditions that made it “overvalued” in the first place remain constant. Fortunately, this is the case here with Cloudflare. Like other big tech stocks, favorable winds related to the pandemic played a major role in its stock price performance from March 2020 to today.

But the demand for CDN (content delivery network) and other services is not going to go away. Even though the world’s largest economies are now in “recovery mode” after the pandemic. Cloudflare kept the customers it won in 2020 and added many more to this list. The company appears poised to generate above-average revenue growth in the years to come.

Again, this may not translate to another incredible price increase. But if the trends seen in its latest results continue, the gains from there could be more gradual. It won’t have much trouble reaching new historic heights on the road.

The verdict on Cloudflare Stock

Arrive with a “B” grade in Portfolio filing cabinet, Cloudflare remains a solid stock to buy and hold for the long term. Another 2x or 10x price increase might not be in the cards in the coming year or both. Yet if it continues to exceed expectations, retains its existing customer base, and successfully adds more large corporate clients to its portfolio, it will provide solid growth value for years to come.

Stocks will be able to overcome valuation issues and gradually add to the incredible gains seen with the stock over the past few years. As some investors are pulling out right now and taking profits after Cloudflare’s latest earnings report, it may be time to initiate a position in NET stocks.

At the time of publication, Louis Navellier had a long position on NET. Louis Navellier did not have (directly or indirectly) any 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 position in any of the securities mentioned in this article.

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