What happened
Shares of Cloudflare (NET 5.60%), a cloud platform company, were tumbling today after the company reported its fourth-quarter results late yesterday. Despite delivering quarterly earnings that were on par with analysts' consensus estimate and revenue that beat Wall Street's expectations, the tech stock took a nosedive today.
Cloudflare's stock was down by as much as 10.6% today and had fallen 9.5% at the end of the trading day.
So what
Cloudflare reported break-even non-GAAP earnings per share for the quarter, which met analysts' consensus estimate. Additionally, the company's revenue of $193.6 million in the quarter outpaced Wall Street's estimate of $184.9 million.
The company also issued full-year revenue guidance in the range between $927 million to $931 million, which was far above analysts' consensus estimate of $891 million.
With all of that good news, you'd expect that Cloudflare's stock would be soaring today. But investors may instead have been focusing on rising inflation, upcoming interest rate hikes by the Federal Reserve, and the potential conflict between Russia and Ukraine.
Technology stocks have been a bit erratic since the beginning of this year as investors have processed data about rising inflation, which is now at a 40-year high. Rising inflation caused the 10-year Treasury yield to climb to a two-year high yesterday, though it retreated a bit today.
Investors have also been anticipating that the Fed will raise interest rates as early as next month and could issue multiple rate hikes throughout 2022. When interest rates rise it makes borrowing more expensive for companies and can, in turn, hurt their growth.
And finally, Cloudflare's stock may have slid today in sympathy with the broader market. The S&P 500 was down by 1.9% today, with most of the losses coming later in the afternoon as more news surfaced about rising tensions in the region.
Now what
Cloudflare investors should be pleased with the company's fourth-quarter results. While some macro events may be causing the company's share price to fall today, there's nothing in the company's fourth-quarter results that should make investors doubt Cloudflare's long-term potential.
All of which means that for investors with a years-long investing timeframe, it may be best to ride out today's drop instead of reacting to what the rest of the market is doing.