Cloudflare (NET) Stock Forecast & Price Target

Cloudflare has demonstrated robust growth metrics, evidenced by a 31% year-over-year revenue increase to $562 million, surpassing management's guidance. The company's remaining performance obligations (RPO) grew 42.6% year-over-year, reflecting an acceleration in growth for three consecutive quarters, alongside a notable improvement in Net Dollar Retention Rate (NDR) to 119%. Additionally, Cloudflare's strategic focus on enterprise sales and increased sales productivity led to the addition of a record number of high-value customers, which underpins a positive long-term outlook for the company.

The financial analysis indicates a negative outlook for Cloudflare's stock largely due to uninspiring incremental profitability and concerns that future bottom-line targets may need to be revised downwards. Additionally, a decline in gross margin driven by a higher mix of paid traffic has increased cost of goods sold, which reflects ongoing pressures on the firm's financial health. Lastly, the company faces significant valuation risks, as high-growth stocks, including Cloudflare, are experiencing marked sell-offs in a challenging market environment, particularly when carrying elevated EV/Sales multiples.