artificial Intelligence (AI) can be a powerful ally in the high-stakes field of cybersecurity. But it is also a potential weakness. It can analyze large amounts of data, detect patterns and counter cyber threats instantly. However, cybercriminals are also able to exploit it.
Cloudflare, Inc. (NET), a web infrastructure and website safety company, has quietly been making waves in this environment. Cloudflare, a web infrastructure and website security company, has quietly been making waves in this environment. Cloudflare is set to play a major role in Apple’s Private Cloud Compute by encrypting AI questions. Hamza Fodderwala, an analyst at Morgan Stanley , predicts that Cloudflare will see a rise in its top line as Apple’s AI usage increases.
Cloudflare has bright growth prospects, and its current price is well below its 52 week high. This could be the perfect time to add this stock to your investment portfolio.
Cloudflare Stock
Cloudflare, Inc. (NET), a San Francisco-based company founded in 2009, is a global leader in cloud services. Cloudflare is a cloud-based security solution provider that protects everything from IoT devices to public cloud platforms.
It enhances website performance by using tools such as content delivery network (CDN), load balancing, and more. Cloudflare One’s innovative SASE platform offers a seamless experience of network-as a service. Cloudflare, a company trusted by tech giants, governments, and financial institutions, continues to redefine digital performance and security. Its market cap is $26.6 billion.
Cloudflare has adopted AI to supercharge their services. Cloudflare ensures security and efficiency by centralizing the best protection for hosted sites. Its data centres now power generative AI software, leveraging NVIDIA Corporation’s (NVDA) Hardware and AI algorithms. Cloudflare is now a leader in the AI-driven tech industry thanks to this move.
Cloudflare’s current price is 32.8% lower than its 52-week peak of $116 set on February 9. Despite the double-digit drop, Cloudflare shares have risen 21.8% in the past 52 weeks.
www.barchart.com
Cloudflare’s stock is valued at 20,35 times its sales. This is lower than the average for the last five years of 33,20x.
Cloudflare’s Strong Q1 and Optimistic Forecast
Cloudflare announced its Q1 resultss, underlining its strong momentum in cybersecurity. Revenue grew 30% over the previous year to 378.6 millions. This was driven by strong client acquisitions, and an expanding adoption of zero-trust solutions by major enterprises. The company reported adjusted earnings per share of $0.16, exceeding estimates of $0.13.
Cloudflare has a net dollar-based retention of 115%. This shows a high level of customer satisfaction and loyalty. Cloudflare had a record 197,138 paying clients, up 17% over the previous year, including 122 high-revenue customers. Its solid operational metrics, highlighted by an operating cash flow (of $73.6 million, 19% of revenue), and a free cash flow (of $35.6 million, 9% of revenue), were also highlighted.
Cloudflare expects a strong performance in the current quarter, with revenue ranging between $393.5 and $394.5 millions. Non-GAAP earnings per share are targeted at $0.14. Cloudflare expects revenue in fiscal 2024 to range between $1.648 and $1.652 Billion, with non-GAAP earnings projected to be $0.60 to $0.61.
What do analysts expect for Cloudflare stock?
Morgan Stanley analysts led by Hamza Fdderwala predict a promising future, especially in light of Apple’s AI expansion. Apple announced Private Cloud Compute, a private AI-processing system, at WWDC24. This was in addition to Apple Intelligence. Analysts believe that Cloudflare plays a crucial role in encrypting AI questions for PCC. This is important for privacy and security. Cloudflare’s OHTTP relay, citing iCloud Private Relay, is a key component, according to the analysts.
Morgan Stanley believes that Apple’s growing AI footprint will boost Cloudflare’s top-line growth by a low- to mid-single digit percentage from fiscal 2025 through fiscal 2027. They estimate that Apple will adopt more chips and handle more queries, resulting in a revenue opportunity between $50 million and $100 million per year.
Morgan Stanley is cautiously optimistic despite these promising prospects and has rated NET stock “Equal-weight”. Their $92 price goal suggests an 18% potential increase in Friday’s closing prices.
Cloudflare’s rating is a “Moderate” Buy. Eight of the 27 analysts who cover the stock recommend a “Strong Buy”, two a “Moderate Buy”, 13 are safe with a “Hold”, one suggests a ‘Moderate Sell’ and the remaining three a ‘Strong Sell’.
www.barchart.com
The mean Cloudflare price target is $90.08, which suggests a potential upside of 15.5% over the current price levels. The Street-high price target of $135 suggests that NET’s stock could rise as much as 73.2%.
Sristi Suman Jayaswal had no positions (directly or indirectly) in any of securities mentioned in this post as of the date of publication. This article contains only information. Please click here for more information.