S&P 500 may face selling pressure as systematic funds reach full exposure
On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook for Cloudflare Inc . (NYSE:NET), reducing the price target on the company’s shares to $140 from the previous $160, while maintaining a Neutral rating. The adjustment followed the firm’s attendance at Cloudflare’s Investor Day held in New York City. The stock, currently trading at $119.40, has experienced an 8.87% decline over the past week, though it maintains a strong 51.93% gain over the past six months. According to InvestingPro analysis, the stock appears overvalued at current levels.
During the event, Cloudflare’s management conveyed a steady view of the current macroeconomic landscape, reaffirming their confidence in an acceleration of growth beyond the first quarter, in line with the company’s recently issued 2025 guidance. The management also reiterated their long-term margin goals and expressed assurance in their ability to sustain annual revenue growth at the same pace as in 2024, estimated between 28%-29%, for several more years. This confidence is supported by the company’s impressive 77.32% gross profit margin and current revenue growth rate of 28.76%. The company maintains a healthy financial position with a current ratio of 2.86, indicating strong liquidity.
The analysts at Mizuho consider this growth target robust and find it somewhat unexpected that the market’s response to the news was not more enthusiastic. They acknowledged Cloudflare’s highly scalable infrastructure and culture of innovation, particularly highlighting the company’s potential in AI inferencing.
Despite these positive attributes, Mizuho cited a high valuation for Cloudflare’s stock as a reason for their continued preference for other high-growth software companies at the moment. The firm’s decision to lower the price target is attributed to recent compression in comparable company multiples, which has influenced their valuation assessment of Cloudflare. The stock’s elevated Price/Book ratio of 39.36x reflects these valuation concerns. For deeper insights into Cloudflare’s valuation metrics and growth potential, access the comprehensive Pro Research Report available on InvestingPro, which includes 14 additional exclusive ProTips and advanced valuation tools.
The announcement comes at a time when investors are closely monitoring the performance and future outlook of technology firms, especially those in the high-growth software sector. Cloudflare’s commitment to maintaining strong growth and margin targets suggests a positive trajectory, but the market’s cautious reaction as noted by Mizuho reflects broader considerations of valuation and comparative opportunities within the industry.
In other recent news, Cloudflare Inc. reported a 27% year-over-year revenue increase, surpassing expectations from analysts at Mizuho and Wall Street. This performance has led several firms to adjust their price targets for Cloudflare. Citi analysts raised their price target to $180, maintaining a Buy rating due to Cloudflare’s strong customer acquisition and robust bookings. Similarly, RBC Capital increased their target to $170, citing Cloudflare’s successful go-to-market strategy and strong year-end results. TD Cowen also raised their target to $162, highlighting Cloudflare’s effective execution of strategies that enhance productivity.
Stifel analysts maintained their Buy rating and a $175 target, expressing optimism about Cloudflare’s growth prospects and upcoming Investor Day. Mizuho, while raising their target to $160, kept a neutral rating, acknowledging Cloudflare’s strengths but noting its high valuation. These developments reflect confidence in Cloudflare’s potential for sustained growth and market expansion. The company’s strategic initiatives and solid performance have garnered positive attention from analysts, who anticipate further insights during the upcoming Investor Day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.