Key Takeaways
- Cloudflare fell 32% from its Oct. 9 record close to its Nov. 5 close, just before its third-quarter report. After the report, Goldman Sachs kept its Buy rating and $420 price target, 56% above the Nov. 6 close.
- Revenue grew 39% in the third quarter, the fastest in nearly four years, and management now expects a GAAP profit in the fourth quarter.
- Heading into the report, the consensus price target had risen to $345 from $240 a year ago, and analysts’ 2027 earnings estimate had risen to $1.69 a share from $1.59 three months earlier.
- Goldman’s $420 works out to 284x forward earnings, well above any quarter-end multiple since mid-2023, so the Street’s $345 average is the more realistic target for the next year.
Cloudflare (NET) fell 32% from its Oct. 9 record close of $360.93 to $244.51 on Nov. 5, the day of its third-quarter report. Then it reported 39% revenue growth, its fastest in nearly four years, and shares rose 9.91% to $268.75 on Nov. 6. Goldman Sachs reiterated its Buy rating and $420 price target, 56% above that close.
A rough few weeks for AI stocks
A software selloff hit cloud stocks in late October. Then Democrats won control of both chambers of Congress after a campaign in which candidates from both parties went after AI data centers. And on Nov. 5, hours before the report, cybersecurity stocks sold off again as the AI trade unwound.
Goldman’s case rests on the guide
Goldman’s Gabriela Borges stuck with her call on Nov. 6, and the numbers gave her plenty to work with. Third-quarter revenue of $782.5 million beat Wall Street’s $738.5 million estimate by 6%. The fourth-quarter outlook of $845 million to $846 million sits 6% above the Street on revenue, and the 43-cent adjusted EPS guide runs 13% ahead, based on consensus figures compiled by Benzinga. CEO Matthew Prince called it “Cloudflare’s best quarter ever.”
Cloudflare also expects a GAAP profit in that quarter. CFO Thomas Seifert said that would come “significantly earlier” than the 2028 deadline the company set at its investor day. It is a forecast, not a result yet.
TIKR tracks 34 analysts on Cloudflare. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Cloudflare, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Cloudflare’s Analyst Ratings
Does $420 add up?
Analysts didn’t follow the stock down. Heading into the report, the consensus target had risen to $345 from $240 a year ago, 28% above the Nov. 6 close.
Before the report, the highest of those targets was $430, so Goldman’s sits near the top.
Earnings estimates have gone up too. Analysts expect $1.69 a share of normalized earnings in 2027, up from $1.59 three months earlier.
The new guidance should push those estimates up again: management now expects $1.35 a share of non-GAAP earnings for 2026, above the $1.26 consensus going into the report.
Goldman needs a lot more from the multiple, though. At the Nov. 2 close, Cloudflare traded at 179x the $1.48 a share analysts expect over the next twelve months, close to its 173x average at quarter-ends since mid-2023. Goldman’s $420 works out to 284x those same earnings, well above the 235x high over that stretch.
Good enough for a rebound
The cash picture is thinner than the adjusted numbers suggest. Cloudflare paid $174.1 million in stock compensation and related payroll taxes in the third quarter, more than twice its $82.1 million of free cash flow.
Goldman has the business right, and the Street’s $345 average looks well within reach. But $420 within a year needs investors to pay more for Cloudflare’s earnings than at any quarter-end since mid-2023. That is hard to underwrite while the company still posted a $34.1 million GAAP net loss in the third quarter.
The fourth-quarter report, likely in February, will show whether that GAAP profit arrives.
So what is Cloudflare stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Cloudflare could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
