Cloudflare (NET +3.81%) stock has been having a rough time of it very recently, following an earnings report that left many investors dissatisfied.
Many are getting more bearish on the content delivery network (CDN) specialist, including several analysts tracking the stock. One just pulled the lever on a big price target cut, but here's the catch -- he kept his buy recommendation intact, and had some positive things to say about that report.
One of many cutters
Among the numerous price target reducers in the wake of Cloudflare's earnings report was KeyBanc's Thomas Blakey. He took a large blade to his level, whacking it down to $94 per share from the previous $132. Yet in his view, it remains an overweight (i.e., buy).
On the surface of it, Cloudflare's first quarter wasn't bad at all; in fact, in some ways it was impressive. Revenue rose by a sturdy 30% year-over-year to almost $379 million, while non-GAAP (adjusted) net income more than doubled to top $58 million. Both figures beat the average analyst estimates. Guidance for both the current quarter and full year broadly met prognosticator expectations.
However, this is a company that has traded at very high valuations. Fairly or otherwise, many investors in such situations expect a business not only to perform to expectations, but to exceed them. Cloudflare didn't meet that standard.
NYSE: NET
Key Data Points
A high-potential, high-priced operator
Among other factors, Blakey cut his Cloudflare price target on macroeconomic concerns. These, he believes, will exert some downward pressure on the shares.
Cloudflare products and services are compelling (particularly its security offerings), so it surely has potential no matter the environment it operates in. I think it's a worthwhile bet in spite of those vertigo-inducing valuations; CDN is a hot, long-tail segment in a world packed with increasingly advanced online services.
