Cloudflare (NYSE:NET) Shares Down 2.6% - Time to Sell?

Key Points

• Cloudflare shares fell 2.6% to $266.54 in mid-day trading, with volume 15% below the average session level.
• Analyst views are mixed: JPMorgan upgraded the stock and set a $350 target, while Jefferies cut its target to $320 and other firms downgraded shares. Overall, analysts have a consensus “Hold” rating and an average $333.21 price target.
• Investors are watching the upcoming Q3 results for signs growth can justify the valuation; Cloudflare’s latest reported quarter beat earnings and revenue estimates, with revenue up 35.9% year over year.

Cloudflare, Inc. (NYSE:NET - Get Free Report)'s stock price dropped 2.6% during mid-day trading on Wednesday. The company traded as low as $257.83 and last traded at $266.5350. 3,404,464 shares were traded during trading, a decline of 15% from the average session volume of 4,025,688 shares. The stock had previously closed at $273.62.

Key Cloudflare News

Here are the key news stories impacting Cloudflare this week:

• Positive Sentiment: JPMorgan upgraded Cloudflare to Overweight from Neutral, setting a $350 price target. The analyst sees the recent pullback as an attractive entry point and believes revenue growth could accelerate. JPMorgan upgrades Cloudflare to Overweight
• Positive Sentiment: A Polen Capital investor-letter article points to accelerating revenue growth and a raised outlook as reasons for an outperforming view of NET, reinforcing the growth case for the shares. Polen Capital investor-letter coverage
• Neutral Sentiment: Cloudflare is scheduled to report Q3 results on November 5. The release may provide a near-term catalyst, with investors watching for evidence that growth and the outlook can support the stock’s valuation. Cloudflare Q3 earnings preview
• Negative Sentiment: Jefferies lowered its price target to $320 from $350, adding to analyst caution. Separate coverage cites Cloudflare’s rich valuation, insider selling, and options-market positioning that points to downside risk after earnings. Jefferies cuts Cloudflare price target Insider selling and options-market outlook

Wall Street Analyst Weigh In

Several equities research analysts have commented on NET shares. Barclays boosted their target price on Cloudflare from $355.00 to $400.00 and gave the company an "overweight" rating in a research note on Monday, October 12th. TD Cowen downgraded shares of Cloudflare from a "buy" rating to a "hold" rating in a report on Tuesday. Wall Street Zen downgraded shares of Cloudflare from a "buy" rating to a "hold" rating in a report on Sunday, October 25th. Fox Advisors lowered shares of Cloudflare to a "neutral" rating in a research report on Tuesday. Finally, Guggenheim increased their target price on shares of Cloudflare from $140.00 to $160.00 and gave the stock a "sell" rating in a report on Friday, August 7th. Twenty-four equities research analysts have rated the stock with a Buy rating, seven have assigned a Hold rating and six have given a Sell rating to the company. According to MarketBeat.com, Cloudflare presently has an average rating of "Hold" and an average price target of $333.21.

Cloudflare Price Performance

The stock has a market cap of $94.21 billion, a price-to-earnings ratio of -459.54, a price-to-earnings-growth ratio of 210.90 and a beta of 1.37. The company has a debt-to-equity ratio of 1.22, a quick ratio of 1.82 and a current ratio of 1.82. The company has a 50-day simple moving average of $320.06 and a two-hundred day simple moving average of $248.60.

Cloudflare (NYSE:NET - Get Free Report) last released its quarterly earnings data on Thursday, August 6th. The company reported $0.29 EPS for the quarter, beating the consensus estimate of $0.27 by $0.02. Cloudflare had a negative return on equity of 3.88% and a negative net margin of 8.21%. The company had revenue of $696.06 million during the quarter, compared to the consensus estimate of $664.66 million. During the same quarter in the prior year, the firm posted $0.21 EPS. The firm's revenue for the quarter was up 35.9% compared to the same quarter last year. As a group, equities research analysts forecast that Cloudflare, Inc. will post 0.03 EPS for the current year.

Insider Activity

In other news, Director Carl Ledbetter sold 5,000 shares of the business's stock in a transaction dated Thursday, August 6th. The shares were sold at an average price of $281.98, for a total transaction of $1,409,900.00. Following the transaction, the director directly owned 883,073 shares in the company, valued at $249,008,924.54. The trade was a 0.56% decrease in their position. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which is available at this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider Michelle Zatlyn sold 33,003 shares of the company's stock in a transaction dated Tuesday, September 8th. The shares were sold at an average price of $277.43, for a total transaction of $9,156,022.29. Following the completion of the sale, the insider directly owned 69,775 shares in the company, valued at approximately $19,357,678.25. The trade was a 32.11% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders sold a total of 264,057 shares of company stock valued at $80,926,805 in the last quarter. Company insiders own 10.66% of the company's stock.

Institutional Trading of Cloudflare

Several institutional investors and hedge funds have recently bought and sold shares of the business. Flagship Harbor Advisors LLC increased its holdings in shares of Cloudflare by 2.7% during the third quarter. Flagship Harbor Advisors LLC now owns 1,238 shares of the company's stock worth $430,000 after buying an additional 33 shares in the last quarter. Financial Management Professionals Inc. lifted its stake in shares of Cloudflare by 6.1% in the 3rd quarter. Financial Management Professionals Inc. now owns 623 shares of the company's stock valued at $216,000 after acquiring an additional 36 shares during the last quarter. Armstrong Advisory Group Inc. boosted its holdings in shares of Cloudflare by 31.2% during the 3rd quarter. Armstrong Advisory Group Inc. now owns 164 shares of the company's stock valued at $57,000 after acquiring an additional 39 shares in the last quarter. CX Institutional boosted its holdings in shares of Cloudflare by 49.4% during the 2nd quarter. CX Institutional now owns 133 shares of the company's stock valued at $33,000 after acquiring an additional 44 shares in the last quarter. Finally, Wedbush Securities Inc. boosted its holdings in shares of Cloudflare by 4.2% during the 3rd quarter. Wedbush Securities Inc. now owns 1,095 shares of the company's stock valued at $380,000 after acquiring an additional 44 shares in the last quarter. Institutional investors own 82.68% of the company's stock.

About Cloudflare

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.

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