What happened

Shares of Cloudflare (NET -3.34%) cratered on Friday, falling as much as 20.5%. As of 1:36 p.m. ET, the stock was still down 20.3%.

The catalyst that sent the cloud computing company plummeting was its quarterly financial report, which was surprisingly robust, but apparently investors wanted more.

So what

For the third quarter, Cloudflare generated revenue of $253.9 million, up 47% year over year and surpassing $1 billion in annualized revenue for the first time. This resulted in adjusted earnings per share (EPS) of $0.06, up from $0.00 in the prior-year quarter. 

To give these numbers context, analysts' consensus estimates were calling for revenue of $250.6 million and EPS of $0.00, so Cloudflare comfortably exceeded both benchmarks. 

Cloudflare added 4,197 paying customers, bringing the total to 156,000, up 18% year over year, marking six consecutive quarters growth has slowed, giving investors pause. Enterprise customers grew more quickly, as Cloudflare added 159 new large customers, bringing the total to 1,908, up 51%. Furthermore, the number of customers spending $500,000 annually grew 88% year over year, while those spending $1 million grew 63%. 

Not only is Cloudflare adding new customers, but it is also getting existing customers to spend more, as evidenced by its dollar-based net revenue retention rate of 124%. 

Now what

For the fourth quarter, management is forecasting revenue of $274 million at the midpoint of guidance, which would represent year-over-year growth of 41%. The company also expects adjusted EPS in a range of $0.04 to $0.05, up from breakeven this time last year. 

While that view would normally be sufficient for investors, the idea that growth might be slowing was enough to sink the stock. Given the economic uncertainty, fair-weather investors are taking a "sell first, ask questions later" approach -- providing an opportunity for those with a longer view to buy shares at a discount.

I'd be remiss if I didn't point out that Cloudflare still isn't cheap in terms of traditional valuation metrics. Even after falling 82% from its high reached late last year, the stock is still trading for 10 times next year's sales, when a reasonable price-to-sales ratio is between 1 and 2.

Given all the available evidence, I believe Cloudflare stock a buy.