Artificial intelligence (AI) is both a great ally and a possible risk in the high-stakes field of cybersecurity. Cybercriminals can make use of it, but they can also analyze large amounts of data, spot trends, and stop cyberattacks in real-time.
Under these circumstances, Cloudflare, Inc. NET
, a provider of website security and online infrastructure, has been quietly making headlines. Since collaborating with Apple Inc. (AAPL), the company that makes iPhones, in 2020, Cloudflare has improved security and privacy for Apple customers, beginning with iCloud Private Relay. It will now be crucial to Apple’s new Private Cloud computing (PCC) system by encrypting artificial intelligence requests. Hamza Fodderwala, an analyst at Morgan Stanley MS, believes that Cloudflare’s revenue would increase as a result of Apple’s increasing use of AI.
Considering that Cloudflare has excellent growth prospects and is currently selling much below its 52-week high, this may be a great moment to add this company to your portfolio.
Concerning Cloudflare Stock
San Francisco-based Cloudflare, Inc. was founded in 2009.
A major player in the world of cloud services is NET. Cloudflare, well-known for its array of cloud-based security solutions, uses web application firewalls and bot management to safeguard everything from IoT devices to public cloud platforms.
In addition to improving security, it makes websites operate better by using methods like load balancing and content delivery networks (CDN). Cloudflare One, its cutting-edge SASE platform, provides a smooth network-as-a-service encounter. With a $26.6 billion market valuation, Cloudflare, trusted by governments, financial institutions, and IT heavyweights, is redefining digital security and performance.
AI has been embraced by Cloudflare to enhance its offerings. Its centralization of excellent protection for hosted websites guarantees strong security and effectiveness. These days, its data centers run generative AI applications that make use of AI algorithms and NVIDIA Corporation’s NVDA technology. With this change, CDN and software performance are improved, further differentiating Cloudflare in the AI-driven tech market.
At the moment, Cloudflare is 32.8% behind its 52-week high of $116, which was reached on February 9. In the last 52 weeks, Cloudflare shares have increased 21.8%, notwithstanding the double-digit decline.
In terms of valuation, Cloudflare stock trades at 20.35 times sales, lower than its five-year average of 33.20x.
Cloudflare’s Positive Outlook and Impressive Q1
On May 2, Cloudflare released its Q1 earnings figures, highlighting its rapid growth in the cybersecurity industry. Revenue increased 30% year over year to $378.6 million, exceeding projections by 1.4%. This growth was fueled by strong client acquisitions and growing adoption among large corporations looking for zero-trust and enhanced security solutions. Above projections of $0.13, the firm posted adjusted earnings per share (EPS) of $0.16.
Notably, Cloudflare demonstrated great customer satisfaction and loyalty with a net dollar-based retention rate of 115%. A record-breaking 197,138 paying customers—up 17% year over year—including 122 new high-revenue customers—as well as operating cash flow of $73.6 million (19% of revenue) and free cash flow of $35.6 million (9% of sales) during the quarter further demonstrated Cloudflare’s strong operational metrics.
With a projected non-GAAP EPS of $0.14 and total revenue expected to fall between $393.5 million and $394.5 million, Cloudflare is expecting a robust financial performance in the current quarter. Longer term, Cloudflare projects non-GAAP EPS of between $0.60 and $0.61 and fiscal 2024 revenue of between $1.648 billion and $1.652 billion.
What Forecast Do Analysts Have for Cloudflare Shares?
Analysts at Morgan Stanley, under the direction of Hamza Fodderwala, see a bright future for Cloudflare, particularly in light of Apple’s growing AI presence. Alongside Apple Intelligence, Apple unveiled Private Cloud Compute (PCC), a private AI processing solution, at WWDC24. The analysts think that Cloudflare plays a major part in PCC’s encryption of AI queries, which is essential for improving security and privacy. They specifically mention Cloudflare’s OHTTP relay and think that it is crucial because it collaborates with iCloud Private Relay.
Because of Apple’s growing AI presence, Morgan Stanley projects that Cloudflare’s top-line growth from fiscal 2025 to fiscal 2027 might experience a low-to mid-single-digit percentage lift. They estimate that as Apple employs more processors and processes more inquiries, there will be an annual income possibility of $50 million to $100 million.
Morgan Stanley maintains an “Equal-weight” recommendation on NET stock and is cautiously optimistic despite these encouraging possibilities. Their price goal of $92 indicates a possible 18% increase from Friday’s closing price.
Overall, people have given Cloudflare a “Moderate Buy” rating. Eight analysts out of the 27 who are following the stock recommend a “Strong Buy,” two propose a “Moderate Buy,” thirteen play it safe and recommend a “Hold,” one suggests a “Moderate Sell,” and the remaining three indicate a “Strong Sell.”
The average price objective for Cloudflare’s stock is $90.08, indicating a potential 15.5% price increase from the current levels. According to the Street-high target price of $135, NET might increase by much to 73.2% from this point.
As of the publication date, Sristi Suman Jayaswal held no positions in any of the securities referenced in this article, either directly or indirectly. This article’s facts and information are all provided purely for educational reasons.
