Cloudflare (NET) shares jumped in today’s trading after its strong first-quarter earnings and guidance impressed analysts. Indeed, BofA Securities kept its Buy rating and $160 price target, noting that Cloudflare brought in $479 million in revenue, which was $10 million more than expected and 300 basis points above consensus. Analysts led by Madeline Brooks pointed to strong demand for Cloudflare’s SASE (Secure Access Service Edge) and Workers products, which shows that the company has a solid position in cybersecurity and AI support.
While Cloudflare’s operating margin came in slightly below expectations at 11%, analysts said that the company increased its go-to-market spending to 38% of revenue (up from 36% last quarter) to build on its momentum. As a result, Brooks’ team believes that Cloudflare still has room to beat full-year guidance, especially as the AI market moves from training models to large-scale deployment, which is Cloudflare’s strength. Although the stock is expensive compared to other high-growth software firms, Cloudflare stands out by guiding for faster growth and improving performance.
Separately, five-star Jefferies analyst Brent Thill kept a Hold rating and cut his price target to $150 from $170. The analyst noted that Cloudflare beat the midpoint of its revenue guidance by 2.3% (its best performance in five quarters) and is being cautious with full-year guidance despite no major macro risks. In addition, a $130 million, five-year deal was seen as validation of Cloudflare’s value in an AI-driven market. Meanwhile, Morgan Stanley raised its price target to $150 and said that a nine-figure and seven-year customer deal shows strong confidence in Cloudflare’s long-term innovation. Interestingly, it called Cloudflare a “Best Athlete” that is well-positioned to do well even in an uncertain economy.
Is NET Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NET stock based on 16 Buys, eight Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NET price target of $152.55 per share implies 15.1% upside potential.
