Cloud-based security specialist Cloudflare (NYSE:NET) hasn’t exactly been a rainmaker for its shareholders this year. However, NET stock is heading north today. Most likely, that’s because Wells Fargo analysts just issued an upgrade and price-target hike on Cloudflare shares. As they see it, Cloudflare could generate positive cash flow in the near term while also reducing the company’s expenditures.
So, here’s the scoop. Wells Fargo analysts, led by Andrew Nowinski, upgraded their rating on Cloudflare from “equal-weight” to “overweight,” which is similar to a “buy” rating. They also boosted their price target on the shares from $62 to $65.
Okay, so that’s not a massive price target hike. Yet, the Wells Fargo analysts offered a ray of hope for Cloudflare’s downtrodden investors. In particular, they anticipated that the company could benefit from an “increasing focus on consolidation to reduce costs.”
Could a leaner Cloudflare demonstrate improvement from a financial standpoint? The Wells Fargo analysts seem to believe so, as they expect Cloudflare to demonstrate positive free cash flow during this year’s “back half.”
What’s Happening With NET Stock?
It’s been a bruising year, so it’s understandable if Cloudflare’s investors are on cloud nine today. Frankly, this morning’s 12% rally in NET stock may be a relief rally as much as a reaction to Wells Fargo’s upgrade.
Cloudflare’s loyal investors have weathered plenty of storm clouds in 2022, as the share price fell from over $120 in January to just $45 last week. Today’s rally to $50 could be the start of a recovery, however.
Not long ago, Jefferies analysts observed that “winter came quick” for the software market. NET stock has been hit particularly hard, but the silver lining is that the Wells Fargo analysts noted a recent “solid uptick” in demand trends.
Going forward, Cloudflare still has a lot to prove to Wall Street. Will the company succeed in its strategy of consolidation and retrenchment? Can Cloudflare actually achieve positive free cash flow? All of this remains to be seen.
Today, however, NET stock investors are in celebration mode. After all, a $65 price target implies significant upside from the current share price. Sometimes, financial traders just have to take the good news wherever they can get it.
On the date of publication, David Moadel 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.
