Cloudflare (NET 10.68%) stock surged in Tuesday’s trading. The web services and cybersecurity specialist’s share price ended the day’s trading up 10.7% amid the backdrop of a 0.8% gain for the S&P 500 index and a 2% jump for the Nasdaq Composite index.
Despite sell-offs for the broader tech sector Monday, Cloudflare actually closed the day with significant valuation gains, and its rally continued in today’s session. In addition to rebound momentum for the market, the stock also got a boost from two bullish reports from analysts.
Cloudflare stock surges on price-target hikes from analysts
Before the market opened today, JMP Securities published a new note maintaining an outperform rating on Cloudflare. In other words, the firm’s analysts believed the stock was a worthwhile buy.
JMP raised its one-year price target on Cloudflare stock from $120 per share to $135 per share. With today’s gains, the firm’s new price target suggests a potential downside of roughly 3.6% — although its possible another increase could follow in the not-too-distant future.
JMP thinks that Cloudflare is uniquely well-positioned to see some benefits from the rise of artificial intelligence (AI). The firm has conducted industry field research and found positive demand indicators and signs of tailwinds taking shape for edge-computing services.
Truist also published new coverage on Cloudflare today, maintaining a buy rating on the stock and raising its one-year price target from $120 per share to $140 per share. Notably, today’s gains pushed the web-services company’s stock to a closing price of $140 per share.
What’s next for Cloudflare?
Cloudflare is scheduled to publish its fourth-quarter results and host an investor conference call after the market closes on Feb. 6. In its last quarterly report, the company announced that revenue had increased 28% year over year to reach $430.1 million. The business posted an operating cash-flow margin of 24% and a free-cash-flow margin of 11% in the period.
With its last update, the company guided for sales to come in between $451 million and $452 million in Q4. If the company were to hit the midpoint of its guidance range, it would mean delivering year-over-year sales growth of roughly 24.6% — but Wall Street may be looking for the business to outperform that target on the heels of the business’ strong Q3 momentum. Trading at roughly 164 times this year’s expected earnings, Cloudflare could see valuation volatility, depending on how its upcoming earnings report shakes out, but the business continues to look well-positioned for the long term.
Keith Noonan has positions in Cloudflare. The Motley Fool has positions in and recommends Cloudflare and Truist Financial. The Motley Fool has a disclosure policy.
