Cybersecurity stock Cloudflare (NET 0.12%) sat on a wall, and last week, the stock had a great fall. Despite reporting "beats" on both the top and bottom lines of its Q1 earnings report last week, shares of the cybersecurity specialist sold off by 16% -- and haven't recovered yet.
But maybe they will. And maybe they'll do even better than that.
According to Oppenheimer analyst Shaul Eyal, Cloudflare stock -- which costs just over $74 today -- could rocket more than 48% to $110 per share within a year. So no wonder he rates the stock outperform (i.e., buy).
Is Cloudflare a buy?
Eyal may be right. The stock's sell-off notwithstanding, Cloudflare's report last week looked pretty great all around. Both profits and sales topped expectations for Q1, with revenue increasing a solid 30% year over year, adjusted earnings rising 100%, and free cash flow growing 156%. Cloudflare management also guided investors to expect more sales and profits than analysts have been predicting for the second quarter. Furthermore, management climbed out on a limb and said the company will beat expectations all year long!
Of course, Eyal's greatest hopes for Cloudflare lie in the realm of artificial intelligence (AI), where the company is working on "a dozen unique AI projects" and has a "strong sales pipeline." (That's right, folks. He's saying Cloudflare is really an artificial intelligence stock.) That's probably why, on average, analysts are forecasting a long-term trend of 67% annualized earnings growth for the company.
But is that enough? I mean, it's true Cloudflare more than doubled its free cash flow (FCF) in Q1. But sales rose only 30% year over year last quarter, and the forecast is for that to moderate to (an entirely respectable, but slower) 27% pace already this year. With Cloudflare shares costing 155 times trailing FCF right now, I'm afraid the stock simply looks too expensive to buy -- much less buy for 49% more money.
