When Cloudflare (NET) posted first-quarter results, shares fell by 15.6% to $65.61 on May 6, 2022.
Analysts, late as usual on warning of the risks, downgraded their outlook.
Cloudflare, which operates a content delivery network (or CDN) and a security layer, posted earnings of
a penny a share (adjusted). It posted revenue of $212.2 million. The stock hurt Zscaler (ZS), Fastly (FSLY),
and Akamai (AKAM).
Cloudflare added 14,000 customers in the quarter and now has over 154,000. In Q2, it expects revenue
of $226.5 million to $227.5 million. For the year, it expects revenue of $955 million to $959 million. The
strong guidance failed to impress markets. Analysts cut their price targets, citing the 50% topline growth
as insufficient.
Cloudflare’s stock is now a victim of the post-pandemic slowdown for online solutions. Customers over-
spent on CDN services during the lockdown. Now that corporations are ordering people back to work or
offering a hybrid work environment (working part-time in the office), cloud software stocks will
underperform.
Cloudflare’s excess valuations are still a headwind for the stock. This is a great company with strong
growth. The market’s bullishness fell sharply since November 2021. The sentiment shift to the downside
will not reverse. Expect the stock to under-perform the Nasdaq index from here.
