Shares of Cloudflare (NYSE:NET) slumped out of the gate to start the week, falling as much as 6%. As of 1:44 p.m. ET, the stock was still down 3.5%.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
The catalyst that sent the edge computing and cybersecurity specialist lower was a bearish note from a Wall Street analyst.
Image source: Getty Images.
Great expectations
Jefferies analyst Joe Gallo maintained a hold rating on Cloudflare but lowered his price target to $320, down from $350. That still represents potential upside of 14% compared to Friday’s closing price. The analyst suggests he expects higher demand for the company’s cloud services in the current quarter but believes the bar may be set too high.
Analysts’ consensus estimates call for revenue of $739 million, representing year-over-year growth of 32%, and adjusted earnings per share (EPS) of $0.34, up 26%. For context, Cloudflare’s forecast calls for revenue in a range of $736 million and $737 million and adjusted EPS of $0.34, so Wall Street is predicting higher sales growth than management’s outlook.
That’s no coincidence. Cloudflare has an impressive track record of beating expectations, surpassing Wall Street’s consensus estimates in each of the past four quarters. That said, investors are fickle, so there’s no way to know for sure how the stock will react to any given quarter of financial results. We’ll know for sure when Cloudflare reports after the market close on Thursday.
Taking a step back, however, suggests the future is bright. Just last month, Cloudflare deployed protective measures against the highly publicized PHP website vulnerability ahead of the public disclosure. PHP is used by roughly 70% of all websites, and this security vulnerability could have allowed hackers to access servers, steal customer data, and disrupt services, according to Cloudflare. Reports suggest there were thousands of hacking attempts leading up to the revelation and millions thereafter.
This helps to illustrate the importance of Cloudflare’s cloud and cybersecurity services and why investors should focus beyond the company’s next financial report.
Should you buy stock in Cloudflare right now?
Before you buy stock in Cloudflare, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cloudflare wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
