Cloudflare: Strong Growth and Demand Momentum Offset by Margin Pressure and Stretched Valuation, Justifying a Neutral Hold Stance

Analyst Roger Boyd from UBS reiterated a Hold rating on Cloudflare and increased the price target to $220.00 from $210.00.

Roger Boyd has given his Hold rating due to a combination of factors tied to Cloudflare’s strong growth but stretched valuation. The company outperformed on revenue with notable acceleration and provided an above-consensus outlook, supported by improving net revenue retention, robust RPO growth, and momentum in large, multi‑year deals that validate the long‑term demand story.

At the same time, gross margins have been sliding for several quarters and are expected to remain under pressure as the mix shifts toward developer and freemium-driven business, while operating margins and free cash flow are not set to expand meaningfully in the near term. Given these margin dynamics and the stock’s high EV/sales multiple that already discounts sustained acceleration, Boyd views the risk/reward as balanced at current levels and therefore maintains a Neutral (Hold) stance rather than recommending new purchases.

In another report released today, Piper Sandler also maintained a Hold rating on the stock with a $222.00 price target.