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Cloudflare (NET) Gains As Market Dips: What You Should Know

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Cloudflare (NET) closed at $44.34 in the latest trading session, marking a +1.65% move from the prior day. This move outpaced the S&P 500's daily loss of 0.13%. At the same time, the Dow lost 0.15%, and the tech-heavy Nasdaq gained 0.14%.

Prior to today's trading, shares of the web security and content delivery company had lost 13.62% over the past month. This has lagged the Computer and Technology sector's loss of 2.49% and the S&P 500's loss of 3.32% in that time.

Investors will be hoping for strength from Cloudflare as it approaches its next earnings release. On that day, Cloudflare is projected to report earnings of -$0.01 per share, which would represent year-over-year growth of 50%. Our most recent consensus estimate is calling for quarterly revenue of $227.48 million, up 49.23% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $0.03 per share and revenue of $956.16 million. These totals would mark changes of +160% and +45.66%, respectively, from last year.

Any recent changes to analyst estimates for Cloudflare should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 1.74% lower. Cloudflare is currently a Zacks Rank #3 (Hold).

Looking at its valuation, Cloudflare is holding a Forward P/E ratio of 1661.71. Its industry sports an average Forward P/E of 40.05, so we one might conclude that Cloudflare is trading at a premium comparatively.

It is also worth noting that NET currently has a PEG ratio of 66.47. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Internet - Software stocks are, on average, holding a PEG ratio of 2.23 based on yesterday's closing prices.

The Internet - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 161, which puts it in the bottom 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow NET in the coming trading sessions, be sure to utilize Zacks.com.


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