Goldman Sachs analyst Kash Rangan has maintained their bearish stance on NET stock, giving a Sell rating on February 9.
Kash Rangan’s Sell rating is based on a detailed evaluation of Cloudflare’s current financial standing and future prospects. Despite acknowledging the recent positive performance of Cloudflare, including a solid fourth quarter earnings report and significant year-over-year growth in new Annual Contract Value (ACV), Rangan believes that the stock’s current valuation is overly optimistic. The company has shown commendable progress in security and enterprise market penetration, highlighted by an uptick in sales force productivity and larger deal sizes. Furthermore, Cloudflare’s traction with its Zero Trust product, marked by several large customer wins, and the appointment of Mark Anderson as President of Revenue, who brings valuable experience from Palo Alto Networks, are seen as potential drivers for future growth.
However, Rangan maintains a cautious stance given that these positive developments seem to be already factored into the stock’s price. The raised price target to $89, up from the previous $45, is based on a 15x enterprise value to sales ratio, aligning Cloudflare with best-in-class peers. Yet, the analyst suggests that this new price target implies a valuation that assumes a highly optimistic scenario. As a result, Rangan’s Sell rating implies skepticism about the company’s ability to deliver performance that would justify a higher valuation, considering the macroeconomic challenges and the already high expectations embedded in the stock price.
In another report released on February 9, UBS also maintained a Sell rating on the stock with a $88.00 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.
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