On Friday, TD Cowen maintained its positive stance on Cloudflare Inc . (NYSE: NYSE:NET), reiterating a Buy rating and a price target of $110.00. The firm's analysis followed Cloudflare's third-quarter 2024 performance, which showcased a robust 28% revenue growth. The company also adjusted its revenue guidance slightly upwards, which was noted to be just above the market consensus. This adjustment, however, was more conservative than what some investors might have anticipated.
Cloudflare's recent financial results indicated that certain U.S. deals were deferred due to sales capacity limitations. Nevertheless, the company pointed out that the third quarter represented the lowest point in terms of capacity, and it expects to improve hiring to leverage productivity enhancements. These initiatives are projected to fuel accelerated growth into 2025.
The firm's analyst underscored the company's solid quarterly outcomes and the minor increase in revenue guidance, which exceeded the general market expectations by a small margin. Despite some investors potentially hoping for a more robust forecast, the analyst believes Cloudflare's strategy of bolstering its sales force will pay off in the near future.
Cloudflare's acknowledgment of reaching a trough in sales capacity during the third quarter suggests that the company has identified and is addressing the constraints that have affected its deal closures. The planned increase in hiring is anticipated to enhance productivity and drive growth as the company moves into 2025.
The reiterated Buy rating and $110 price target reflect the firm's confidence in Cloudflare's growth trajectory and its ability to overcome the current challenges. The company's strategic adjustments and focus on scaling up its workforce are expected to contribute to its continued success in the competitive cloud services market.
In other recent news, Cloudflare, Inc. reported promising third-quarter earnings and revenue, surpassing analyst estimates. The cloud connectivity company posted adjusted earnings per share of $0.20, exceeding the predicted $0.18, and revenue of $430.1 million, a 28% increase year-on-year, beating the consensus estimate of $424.14 million. However, despite the strong Q3 performance, Cloudflare's Q4 revenue guidance of $451-452 million fell short of the $455.7 million analyst consensus.
Cloudflare's full-year 2024 revenue outlook of $1.661-1.662 billion was roughly in line with expectations. The company also reported non-GAAP income from operations of $63.5 million, or 14.8% of revenue, compared to $42.5 million, or 12.7% of revenue, in the same quarter last year.
In other recent developments, Cloudflare added a record 219 large customers in the quarter, with 35% of the Fortune 500 now being paying customers. For Q4 2024, the company expects adjusted EPS of $0.18, slightly above the consensus of $0.17, and raised its full-year 2024 adjusted EPS guidance to $0.74, compared to the analyst estimate of $0.72.
InvestingPro Insights
Cloudflare's recent performance and future outlook are further illuminated by data from InvestingPro. The company's market capitalization stands at $32.69 billion, reflecting its significant presence in the cloud services sector. Cloudflare's impressive revenue growth of 31.09% over the last twelve months aligns with the 28% growth mentioned in the article, underscoring the company's consistent expansion.
InvestingPro Tips highlight Cloudflare's financial strengths and areas for investor consideration. The company boasts "impressive gross profit margins," which is evident in the 77.3% gross profit margin reported for the last twelve months. This high margin suggests Cloudflare's ability to maintain profitability as it scales its operations and invests in sales capacity.
Another relevant InvestingPro Tip notes that Cloudflare has seen a "significant return over the last week," with data showing a 9.26% price return in the past week. This recent stock performance may reflect investor optimism following the company's Q3 results and upward guidance adjustment.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide deeper insights into Cloudflare's financial health and market position.
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