CloudFlare Is a Great Investment, Despite Short-Term Headwinds

NET stock - CloudFlare Is a Great Investment, Despite Short-Term Headwinds

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Cloud services company Cloudflare (NYSE:NET) has had a rough spring. Many tech stocks are getting hammered because of the current market, and the climate for investors is currently very rocky thanks to rising rates and widespread uncertainty. Earlier this month, Cloudflare beat earnings expectations by a good margin but it didn’t help. The lack of positive momentum in NET stock must be frustrating for investors.

For conservative investors, it might be a good time to invest in dividend and retirement stocks to avoid the market volatility. However, if you can stomach more risk, NET stock is a great buy-the-dip prospect.

In the latest earnings report, the company has produced stellar numbers and is on track for even more growth. However, shares might remain depressed for quite some time. The company needs a “rising tide lifts all boats” scenario. In the meantime, you can establish a nice position at a discount.

Is Net Stock A Buy?

Okay, so the company reported a loss for the first quarter. That’s not good, but let’s look at what it said about that. The loss came to 13 cents per share, and revenue rose to $213 million.

Revenue jumped by 54% over the period, and the annual recurring revenue of retained customers has increased by 27% compared to the same period last year.

Cloudflare is forecasting it’ll make between $226.5 million and $227.5 million this quarter. The company’s target for adjusted earnings performance is between breakeven and a loss of $0.01 per share.

As the market reacts to recent rate increases and pessimistic comments made by Federal Reserve, Cloudflare is doing well despite a general sense of negativity. And it’s important to note that it didn’t miss the revenue target.

Cloudflare’s worldwide presence allows 95% of internet users to be within 50 milliseconds of their data centers. That’s amazing coverage and likely saves a lot in bandwidth costs. Being near the location where data is processed offers high performance and faster traffic.

Investors are unsure how things will play out regarding monetary policy. Inflation rates will affect the markets in different ways, and we are seeing a demonstration of that in the past few weeks. For instance, as mentioned above, tech stocks plummeted two weeks ago, wiping billions of dollars in valuations.

Therefore, you are unlikely see investors return to the company anytime soon in this environment. However, as ace investor Louis Navellier put it, the “long-term prospects remain solid.”

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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