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Cloudflare: Excellent Company, But Risky Stock At Current Levels

Aug. 01, 2021 10:02 AM ETCloudflare, Inc. (NET)11 Comments


  • Cloudflare has been one of the most successful stocks in the market since going public in late 2019.
  • Revenue has grown at a 50% CAGR since 2016 and will likely continue to remain north of 25% for many years to come.
  • The company is still working towards non-GAAP profitability, but as it scales and better leverages the expense base, there is light at the end of the tunnel.
  • Valuation is the biggest pushback, with the stock currently trading at nearly 60x forward revenue.
  • I am cautious at current levels, though would be opportunistic on any post-earnings pullbacks or when high-valuation names turn out of favor like the group did in May 2021.

Exterior view of Cloudflare headquarters, San Francisco
Sundry Photography/iStock Editorial via Getty Images

Cloudflare (NYSE:NET) has caused many investors over the past few years to really question if valuation matters. Yes, the company has superior technology and a great business strategy. However, with the stock currently trading at 60x

Cloudflare stock price
Data by YCharts

Cloudflare Vs. Peers valuation
Data by YCharts

This article was written by

Individual investor with hands-on experience in the equity markets. Largely focusing on Tech companies or major mispricings in the market.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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