Cloudflare (NYSE:NET) Shares Gap Up After Better-Than-Expected Earnings

Shares of Cloudflare, Inc. (NYSE:NET) gapped up before the market opened on Friday following a better than expected earnings announcement. The stock had previously closed at $244.51, but opened at $286.97. Cloudflare shares last traded at $275.1820, with a volume of 2,291,429 shares changing hands.

The company reported $0.38 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.34 by $0.04. The firm had revenue of $782.51 million for the quarter, compared to analysts’ expectations of $737.16 million. Cloudflare had a negative net margin of 8.21% and a negative return on equity of 3.88%. The business’s revenue was up 39.2% compared to the same quarter last year. During the same period in the prior year, the company earned $0.27 EPS.

Cloudflare News Roundup

Here are the key news stories impacting Cloudflare this week:

• Positive Sentiment: Cloudflare reported Q3 revenue of $782.5 million, up 39.2% year over year and above analyst expectations. Adjusted EPS of $0.38 also beat consensus. Cloudflare Q3 results and guidance
• Positive Sentiment: The company raised its full-year revenue projection to about $2.96 billion from prior guidance of $2.86–$2.87 billion. Its next-quarter revenue outlook was also stronger than analysts expected. Cloudflare raises full-year outlook
• Positive Sentiment: Enterprise adoption continued to expand: customers spending more than $100,000 annually grew 25% year over year. Management also cited record sales productivity and the company’s first “Act 4” revenue. Three takeaways for long-term investors
• Neutral Sentiment: Needham kept a Buy rating but lowered its price target to $365 from $380; Cantor Fitzgerald cut its target to $310 from $340 and maintained Neutral. The target reductions temper, but do not erase, the positive earnings signal. Needham price target
• Negative Sentiment: Despite rapid sales growth, gross margin fell, free cash flow grew more slowly than revenue, and the GAAP operating loss widened—potential concerns about profitability and the quality of growth. Cloudflare sales, margins and earnings reaction

Analyst Upgrades and Downgrades

Several equities research analysts have recently issued reports on the stock. TD Cowen lowered shares of Cloudflare from a “buy” rating to a “hold” rating in a report on Tuesday. The Goldman Sachs Group set a $420.00 price target on shares of Cloudflare and gave the company a “buy” rating in a report on Friday. Jefferies Financial Group set a $315.00 price objective on shares of Cloudflare and gave the stock a “hold” rating in a research report on Friday. Fox Advisors downgraded shares of Cloudflare to a “neutral” rating in a research note on Tuesday. Finally, Weiss Ratings reissued a “sell (d-)” rating on shares of Cloudflare in a research note on Thursday, October 15th. Twenty-five investment analysts have rated the stock with a Buy rating, eight have given a Hold rating and four have issued a Sell rating to the company. Based on data from MarketBeat.com, the company presently has a consensus rating of “Moderate Buy” and an average target price of $333.75.

Insider Activity at Cloudflare

In related news, Director Carl Ledbetter sold 5,000 shares of Cloudflare stock in a transaction dated Monday, October 19th. The shares were sold at an average price of $304.40, for a total transaction of $1,522,000.00. Following the completion of the sale, the director owned 868,073 shares in the company, valued at $264,241,421.20. This trade represents a 0.57% decrease in their position. The sale was disclosed in a filing with the SEC, which is available through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider Michelle Zatlyn sold 33,003 shares of the business’s stock in a transaction dated Wednesday, October 7th. The shares were sold at an average price of $348.29, for a total transaction of $11,494,614.87. Following the completion of the sale, the insider directly owned 69,775 shares of the company’s stock, valued at approximately $24,301,934.75. This trade represents a 32.11% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders sold 259,057 shares of company stock worth $79,516,905 in the last 90 days. 10.66% of the stock is owned by corporate insiders.

Institutional Trading of Cloudflare

A number of large investors have recently modified their holdings of NET. Jennison Associates LLC boosted its position in shares of Cloudflare by 135.8% in the 1st quarter. Jennison Associates LLC now owns 4,394,484 shares of the company’s stock worth $906,758,000 after purchasing an additional 2,530,872 shares in the last quarter. Sumitomo Mitsui Trust Group Inc. increased its position in Cloudflare by 4.9% during the 3rd quarter. Sumitomo Mitsui Trust Group Inc. now owns 1,046,812 shares of the company’s stock valued at $363,537,000 after buying an additional 48,956 shares in the last quarter. Amundi increased its position in Cloudflare by 2.0% during the 1st quarter. Amundi now owns 1,707,256 shares of the company’s stock valued at $352,275,000 after buying an additional 32,804 shares in the last quarter. National Pension Service increased its position in Cloudflare by 1.6% during the 2nd quarter. National Pension Service now owns 959,987 shares of the company’s stock valued at $235,466,000 after buying an additional 15,546 shares in the last quarter. Finally, Swiss National Bank raised its stake in Cloudflare by 8.1% in the first quarter. Swiss National Bank now owns 927,200 shares of the company’s stock valued at $191,318,000 after buying an additional 69,800 shares during the last quarter. Hedge funds and other institutional investors own 82.68% of the company’s stock.

Cloudflare Stock Performance

The business has a 50 day simple moving average of $319.02 and a 200 day simple moving average of $249.31. The company has a quick ratio of 1.82, a current ratio of 1.82 and a debt-to-equity ratio of 1.22. The company has a market capitalization of $97.35 billion, a PE ratio of -474.84, a PEG ratio of 206.44 and a beta of 1.37.

Cloudflare Company Profile

Cloudflare, Inc (NYSE: NET) provides cloud connectivity, security and performance services for websites, applications, corporate networks and other internet-connected resources. Its global network is designed to help organizations improve the reliability, speed and security of digital services while reducing the complexity of managing internet infrastructure.

The company’s offerings include content delivery and authoritative domain name system services, distributed denial-of-service protection, web application and application programming interface security, bot management, and network security tools.