What’s next for the American web security company?
Cloudflare (NET), the American web performance and security company, said it was on a mission to help build a better Internet.
This is clearly an ambitious goal. However, its success in developing networks with improved security, speed and reliability allowed it to grow rapidly.
The company is now the world’s fifth largest computer security player with a market capitalization of $36 billion and more than 132,000 paying customers. Yet, what future awaits the company, and what factors are shaping Cloudflare’s stock price forecast in 2022?
We take a look at Cloudflare’s most recent earnings, review its stock price performance, and ask industry experts for their thoughts on its outlook.
The business case
The company’s origins date back to 2004, when Matthew Prince and Lee Holloway began investigating how spam ends up in our inboxes.
They built a system that discovered how spammers harvested email addresses. It then morphed into a way to track threats faced by web administrators.
Today, Cloudflare is a global cloud services provider that offers a wide range of services to businesses of all sizes and in all geographies.
The company is focused on improving web performance for customers, while reducing the amount of spam and cyberattacks they receive.
Based in San Francisco, it also has offices in the United States, as well as in Lisbon, London, Munich, Beijing, Singapore and Sydney.
Share price performance
Since its IPO in September 2019, Cloudflare’s stock price has risen 665%, from $15 to $114.81, as of the market close on February 9, 2022.
Over the past year, it has increased by 26%. However, performance hasn’t been as good over shorter time frames, having fallen 8.5% from $123.43 six months ago.
Year-to-date, NET stock is down 10% from its level of $126.95 in early January. Analysts largely attributed the falls to the stock market moving away from growth companies.
Cloudflare’s most recent results, for the third quarter of 2021, revealed that total revenue was up 51% year-over-year to $172.3 million.
It has also experienced substantial growth in its customer base. About 170 large customers were added during the period, bringing the total number to 1,260.
The company’s results showed non-GAAP net income of $1.4 million, compared to a non-GAAP net loss of $5.8 million in the third quarter of 2020.
However, GAAP net loss was $107.3 million, compared to $26.5 million in the corresponding quarter a year earlier, according to the release.
Cloudflare also forecast total revenue of $648 million for the full year of 2021, with a non-GAAP operating loss of $9.5 million.
In a brokerage note released in response to the results, JP Morgan analyst Sterling Auty noted how investors were giving its shares an unprecedented valuation.
“Growth in the quarter was good and looks set to continue into the next quarter, but at this valuation, we believe investor expectations will be for even more over the next two quarters,” he wrote.
Profitability ahead of schedule
In comments attached to the earnings statement, Matthew Prince, co-founder and chief executive, described it as a “historic third quarter” for the company.
“Our strong growth and efficiency also propelled us towards profitability this quarter, reaching this milestone a year ahead of our original schedule,” he said.
He also insisted the company was “laser-focused” on reinvesting profits back into the business, fueling its innovation machine and supporting organizations connecting to its network.
“We want to give them one less worry so they can focus on running their business,” he added.
Cloudflare Stock Analysis: What the Experts Say
In a brokerage note published in early February 2022, seen by Capital.com, JP Morgan’s Auty said the stock had experienced “tremendous volatility during the software bear market” that began last November.
He also suggested that its valuation was still at a significant premium to the overall software-as-a-service universe.
“Last quarter billings increased 55%, indicating potential for acceleration, and it will be interesting to see how management guides both revenue growth and margins in 2022,” he wrote.
Auty also pointed out that NET has taken the opportunity a few times since going public to increase its investments to capture growth. However, he said the view of that might have changed in light of impending interest rate hikes.
“We are seeing greater investor sensitivity to finding a balance between growth and improving earnings,” he explained.
Looking ahead, Auty said he expects a lot of attention on the adoption of Cloudflare’s edge computing platform when it releases its fourth quarter numbers.
Danni Hewson, financial analyst at AJ Bell, acknowledged that it’s been a tough few months for the stock, but argued there were reasons for positivity.
through – Danni Hewson, financial analyst at AJ Bell
“Cloudflare’s stock price has fallen nearly 50% since hitting its all-time high in November last year as investors dumped growth stocks,” she told Capital. .com.
“Given its valuation today, it still looks pretty good, which is likely to raise alarm bells for many investors as the market adjusts to new fiscal policy.”
However, Hewson thinks the sector has potential. “This is a business that will continue to benefit from growing concerns about cybersecurity and the need for businesses to protect their workforce, whether they are in the office or working from their desks. kitchen,” she said.
A question mark hanging over the company is how well its customer base has fared in the face of Covid-19 problems and cost pressures.
Hewson noted that while most customers were SMBs, large enterprises are responsible for more than half of its revenue.
“Any drop in user numbers shouldn’t weigh too heavily, and it’s expected that user numbers will continue to grow,” she added.
Cloudflare (NET) Inventory Forecast: 2022-2030
Is Cloudflare stock a buy, sell, or hold? The combined views of 23 Wall Street analysts compiled by MarketBeat yielded a consensus 12-month NET price target of $151.08. This would represent a 32% rise from the current level at the time of writing (February 10).
The most optimistic analyst suggested the stock could rise 118% to $250 during this period, while the most cautious analyst warned it could fall 21% to $91.
The consensus recommendation was “hold”, with 10 analysts agreeing. Twelve presented it as a ‘buy’, while another said it was a ‘sell’.
Over the past 90 days, Cloudflare shares have been upgraded and downgraded by analysts.
NET stock was an “awesome long-term investment” that could rise 58% to $181.65 in the coming year to February 2023, according to WalletInvestor’s algorithmic forecast at the time of writing. (February 10).
The site gave Cloudflare a positive stock forecast, forecasting the stock to hit $258 by February 2024 and then climb to $329.74 the following year to February 2025.
Meanwhile, the site’s Cloudflare five-year stock forecast saw the stock hit $462.64 in February 2027. This would represent a 303% increase from the current level of $114.81, at the close of the market on February 9, 2022.
As for the longer-term outlook around a Cloudflare stock prediction for 2030, there are too many variables for an accurate prediction. Although it is a thriving industry, competition is intensifying which can have an effect.
Note that price predictions may be wrong. Forecasts should not replace your own research. Always do your own due diligence before investing. And never invest or trade money you can’t afford to lose.
The combined views of 23 Wall Street analysts compiled by MarketBeat yielded a consensus 12-month NET price target of $151.08. This would represent a 32% upside from the current level at the time of writing (February 10th), with price targets ranging from a high of $250 to a low of $91.
Note that analysts’ predictions may be wrong. Forecasts should not replace your own research. Always do your own due diligence before investing. And never invest or trade money you can’t afford to lose.