Strong Performance and Strategic Growth: A Buy Rating for Cloudflare

Robert W. Baird analyst Shrenik Kothari maintained a Buy rating on Cloudflare (NET – Research Report) yesterday and set a price target of $94.00.

Shrenik Kothari has given his Buy rating due to a combination of factors including Cloudflare’s strong first-quarter performance and the robust growth in its remaining performance obligations (RPO), which indicate a strong sales pipeline momentum. Despite a slight miss on billings due to the lumpiness associated with large deals, Cloudflare’s revenue outperformed expectations. Kothari views the company’s conservative guidance for fiscal year 2024 as a strategic under-promise, providing room for potential upside surprises. The addition of seasoned executives Mark Anderson and Tom Evans is also seen as a positive move that could enhance Cloudflare’s go-to-market and sales execution.

The company’s deal metrics are particularly noteworthy with a record number of new customers spending more than $100k, $500k, and $1 million annually, suggesting successful upmarket expansion and deeper penetration into larger accounts. Cloudflare’s significant share of revenue from large customers, which grew from the previous year, underscores its increasing importance as a strategic vendor. Moreover, despite the challenging macroeconomic conditions, Cloudflare’s focus on cybersecurity is expected to benefit from the heightened global tensions, as indicated by their strong performance in the public sector. Kothari’s recommendation considers these factors, alongside a stable dollar-based net retention rate, as indicators of Cloudflare’s resilience and growth potential.

In another report released on April 29, Wells Fargo also maintained a Buy rating on the stock with a $125.00 price target.

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Cloudflare (NET) Company Description:

Founded in 2009 and headquartered in California, Cloudflare, Inc. is a web infrastructure and website security company. The company operates a cloud platform and provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and Internet of Things (IoT) devices.