Internet stocks are usually quite profitable. It’s very easy to profit with websites or apps if you offer something innovative and interesting. After all, there are billions of internet and smartphone users. During the pandemic, people turned to computers for both work or entertainment as they stayed home. As a result, lots of internet stocks surged forward.
Cloudflare is a multi-billion-dollar online network operator. It offers content delivery network services, website security, web infrastructure, and domain name server services.
According to Cloudflare, its revenues jumped to $287 million last year, while 1H20 saw its EPS net loss narrow. The current business environment is very dependent on the internet due to pandemic restrictions. More people work remotely from home, and businesses rely on teleconferencing now more than ever. All of these factors have put Cloudflare’s products and services in high demand.
The company’s revenues surged forward by 48% in the first quarter, reaching $91.3 million, thus beating forecasts. Cloudflare’s total customer count reached 2.8 million, as the company added approximately 250,000 new customers in the quarter.
Sales also grew by 44% year-over-year in the United States, and an even more impressive 58% in Europe. U.S. sales consist of 40% of the company’s total.
What do analysts think?
JPM’s analyst, Sterling Auty, stated that the company’s portfolio of products had gained traction in the current conditions. He expects the company will convert its free Teams offering over to a paid solution in the coming months. That has the potential of generating additional revenue tailwinds.
Auty thinks that there is ample upside opportunity for the revenue figures over the next several years to generate a significant free cash flow profile.
The analysts set his price target at $52, which implies a 48% one-year upside. Cloudflare’s stock has already pushed past its average price target in recent trading. It is currently trading at $36.75.
However, considering Auty’s outlook, Wall Street’s analysts may have to readjust their targets here. Meanwhile, Cloudflare got a Moderate Buy rating from the analyst consensus, based on 8 Buys and 4 Holds.
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