Cloudflare’s (NET) shares rose nearly 3% early Thursday, two days after a widespread outage from the cybersecurity firm locked out some users of platforms such as Elon Musk‘s X and OpenAI’s (PC:OPAIQ) ChatGPT.
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The share rise comes as the Bank of America Securities (BofA) (BAC) reaffirmed its Buy rating on NET stock, noting that it sees only “limited” long-term impact on Cloudflare from the incident.
‘A Latent Bug’ Behind Outage, Cloudflare Says
On Tuesday, Cloudflare’s shares fell almost 3% to $196.53 following the outage, which was later restored. Similarly, NET stock ended Wednesday’s trading marginally lower.
Dane Knecht, the firm’s chief technology officer (CTO), later explained that the outage was due to “a latent bug” that crashed after the cybersecurity firm made a routine configuration change to it. Knecht said the bug was related to a service that forms the backbone of Cloudflare’s bot mitigation capability.
“That cascaded into a broad degradation to [sic] our network and other services,” the CTO added. “This was not an attack,” Knecht emphasized.
BofA Flags Dependency Risk
Reacting to the development, BofA analyst Tomer Zilberman noted that the outage further emphasized the risk of businesses depending on only a few major infrastructure providers. Zilberman pointed to last month’s outages at Amazon Web Services (AMZN) and Microsoft’s (MSFT) Azure cloud service as proof of this risk.
However, the four-star analyst maintained his NET price target of $255, which implies approximately 30% upside. Zilberman contended that the company’s growth in the AI and cloud security market share should help balance out any negative effects from the outage.
Is NET Stock a Good Buy?
Across Wall Street, Cloudflare’s shares continue to hold a Moderate Buy consensus rating from analysts. This is based on 14 Buys and 11 Holds issued by analysts over the past three months.
At $249.41, the average NET price target indicates about 27% upside.
