What happened
Shares of Cloudflare (NET -3.40%)were tumbling Monday morning as investors reacted to an analyst cutting his share price target on the cloud computing services and security company. Traders also continue to worry that rising inflation and the Federal Reserve's efforts to counter it could impede economic growth.
The tech stock was down by 12.4% as of 12:45 p.m. ET.
So what
In a note out Monday, Needham analyst Alex Henderson maintained his buy rating on Cloudflare, but slashed his price target on the stock from $245 down to $100. It was the sixth time this month that a Wall Street analyst cut their price target on the company.
Image source: Getty Images.
Investors may also be processing new comments from former Federal Reserve Chairman Ben Bernanke, who believes that the Fed moved too slowly in its response to rising inflation.
In an interview with CNBC, Bernanke questioned why the Fed had delayed in raising rates. "Why did they delay their response?" he asked. "I think in retrospect, yes, it was a mistake. And I think they agree it was a mistake."
With inflation at its highest level in nearly four decades, the Fed is now taking fairly strong action to bring it back down. This month, it raised the benchmark federal funds rate by 50 basis points.
While getting inflation under control will be a good thing, the Fed now has to act more aggressively to bring it down as quickly as possible. But doing that also hinders economic growth, and investors are concerned that growth companies like Cloudflare will suffer if an economic slowdown -- or a recession -- is around the corner.
Now what
Investors in nearly every sector are driving share prices down as they look for safer places to put their money.
But Cloudflare shareholders should remember that even when there's significant market volatility, holding onto fantastic companies for the long-term -- at least five years -- is still the best way to earn strong returns in the stock market.
