Analysts unveil new Cloudflare stock price target after earnings
This old world can be downright scary, and it doesn't seem to be getting any better.
Matthew Prince can attest to that. The co-founder and CEO of Cloudflare (NET) said the internet security company has seen business increase as tensions rise around the globe.
Prince shared his thoughts with analysts during the company's fourth-quarter earnings call on Feb.8 after Cloudflare posted better-than-expected results.
"The macro environment remains challenging," said Prince. "IT buyers are still skittish, the world is not getting any less complicated, and as a company, we still have a ton to prove," Prince told analysts, according to a transcript of the call.
That may be true, but analysts appear to feel pretty good about what Prince's company has done so far.
Cloudflare sales rising as 'World getting scarier'
The company posted adjusted earnings of 15 cents per share, beating the FactSet consensus of 12 cents. Revenue totaled $362.5 million, compared with Wall Street’s call for $353.1 million in sales.
A year ago, Cloudflare reported 13 cents a share on revenue of $274.7 billion, so the fourth quarter results were up 150% and 32%, respectively.
Looking ahead, Cloudflare forecast first-quarter adjusted earnings of 13 cents per share, matching FactSet's call.
First-quarter sales are expected to range from $372.5 million to $373.5 million. FactSet is calling for total revenue of $373.5 million.
For the full-year, Cloudflare expects adjusted earnings of 58 cents to 59 cents and revenue from $1.648 billion to $1.652 billion. FactSet is forecasting earnings of 57 cents a share on $1.655 billion in revenue.
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Prince noted that the company's federal business and SLED--State, Local, Education--and global government business have all been "showing real signs of strength."
"And I think, in part, it's because of the fact that the world is getting scarier, and we're seeing more attacks," he said.
While 2022 was very quiet on the cyber front, Prince said cyberattacks "really took" off in the back half of 2023, especially after the Hamas-led attack on Israel that began on Oct. 7.
It's not going to get easier.
More than half of the world's population will vote this year, Prince said, "and the fact that we've been leaders in protecting elections and making sure that elections are run without cybersecurity being part of the story has gotten us in the conversation in a lot of places around the world."
Prince also said, "We're not out of the woods economically and in terms of getting totally ahead of inflation," but the U.S. "looks better than some of the other places in the world."
During the call, Prince ticked off some of the quarter’s wins, including a three-year contract with a ceiling value of $33 million for the U.S. Department of Commerce.
In addition, Prince said, a leading technology company expanded their relationship with Cloudflare, signing a three-year $6.6 million contract for Cloudflare zero-trust suite to protect access for 10,000 employees and contractors.
Cloudflare said it had installed graphic processing units (GPUs) in 120 cities by the end of 2023, higher than an internal target of 100. GPUs are essential for AI and high-performance computing.
Analyst says growth will accelerate
"By the end of 2024, we plan to have inference-tuned GPUs deployed in nearly every city that makes up Cloudflare's global network and within milliseconds of nearly every device connected to the internet worldwide," Prince said.
Wall Street analysts seemed happy with what they heard, as several of them raised their price targets for the company.
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Oppenheimer lifted its price target on Cloudflare to $122 from $85 while keeping an outperform rating on the shares.
The firm said the company's fourth-quarter revenue was up 32% year-over-year, a 350-basis-point beat, and the enterprise customer count continued to grow at a high rate.
Cloudflare has a unique and viable cloud platform with growth now set to accelerate, Oppenheimer said.
TD Cowen boosted its price target for Cloudflare to $117 from $93 while keeping an outperform rating on the shares.
The firm noted Cloudflare's strong fourth-quarter results, which were highlighted by 32% revenue growth and the achievement of several performance milestones.
TD Cowen said that go-to-market improvements, strength from zero trust and secure services and secure access service edge, and rapid developer platform growth are expanding Cloudflare's deal size and accelerating growth
Citi raised the firm's price target on Cloudflare stock to $95 from $82 while keeping a neutral rating on the shares.
The analyst sees revenue sustaining over 30% year-over-year growth and bookings sharply accelerating "capped off on an otherwise uneven year amidst a noisy macro."
Truist analyst Joel Fishbein raised the firm's Cloudflare stock price target to $120 from $90 and kept a buy rating on the shares.
He said that the company reported solid results amid a stabilizing macroeconomic environment, beating Wall Street's expectations on the top line while displaying significant operating leverage and delivering strong operating profit and free cash flow.
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