On Friday, Piper Sandler adjusted its price target on shares of Cloudflare Inc . (NYSE: NYSE:NET), increasing it slightly to $83.00 from $82.00, with the firm maintaining a Neutral rating on the stock.
The adjustment on Friday follows Cloudflare's reported uptick in new business and a raised guidance for the year, which, according to the firm, maybe on the conservative side.
The analyst noted Cloudflare's strong performance in the second quarter, attributing it to robust new business growth and a conservative yet positive guide-up for the annual figures. The company's reported remaining performance obligations (RPO) also reflected strength due to the "pool of funds" strategy, and there was an observed increase in the usage of Workers AI.
Despite the optimism about new business growth, there is caution in the market regarding the decrease in net revenue retention (NRR), which was expected to stabilize. The shift towards a pool-of-funds approach is anticipated to introduce a consumption-based model, potentially leading to varying degrees of usage each quarter.
The firm believes that Cloudflare's strategic positioning for executing enterprise deals has been enhanced, especially with the recent appointment of Mark Anderson as Chief Revenue Officer (CRO).
Meanwhile, Cantor Fitzgerald increased its price target for the company to $85, citing Cloudflare's ability to exceed estimates across key financial metrics, including revenue and operating income. RBC Capital also raised its price target to $99, recognizing Cloudflare's solid fundamental drivers and strong financial performance.
Cloudflare's recent financial growth also prompted Mizuho Securities to revise its price target to $92, indicating signs of improvement in the company's performance. Meanwhile, Wolfe Research initiated coverage on Cloudflare with a 'Peerperform' rating, highlighting its potential for sustained growth.
InvestingPro Insights
InvestingPro data indicates that Cloudflare Inc. (NYSE: NET) has a market capitalization of $25.28 billion, reflecting its position in the market. Despite a challenging valuation with a P/E ratio of -137.46 and a forward P/E ratio for the next twelve months at -182.99, the company's revenue growth remains robust at 31.51% for the last twelve months as of Q1 2024. This data aligns with Piper Sandler's observation of Cloudflare's strong performance and new business growth.
Moreover, the company boasts an impressive gross profit margin of 76.78%, which supports the view that Cloudflare's business model is fundamentally strong. InvestingPro Tips highlight that analysts predict the company will be profitable this year, which may interest investors considering the firm's conservative guidance for the year. Additionally, with 15 analysts revising their earnings upwards for the upcoming period, there appears to be a positive sentiment surrounding Cloudflare's financial prospects.
For those seeking more in-depth analysis, InvestingPro offers additional tips on Cloudflare, which can be found at https://www.investing.com/pro/NET. These insights may provide investors with further clarity on whether Cloudflare's current valuation is justified by its growth potential and market positioning.
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