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Cloudflare Stock Lower; Oppenheimer Eyes Valuation, Competition

Oppenheimer analyst Timothy Horan bases a Cloudflare downgrade on valuation concern and intensifying competition.

Cloudflare  (NET) - Get Cloudflare Inc Class A Report shares fell Friday after Oppenheimer downgraded the cybersecurity company to perform from outperform, dropping its $130 price target.

Oppenheimer analyst Timothy Horan based his move on valuation concern and intensifying competition, MarketWatch reported.

Shares of the San Francisco company recently traded at $128.77, down 5.1%. But it had soared 87% over the six months through Thursday amid investor enthusiasm for the cybersecurity industry.

As for the rising competition, Horan cited Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report and  (AMZN) - Get, Inc. Report in particular.

Analysts’ consensus earnings forecasts are overdone, given content-delivery-network price competition, Horan said.

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"We have been one of the biggest bulls on Cloudflare and continue to be very positive on the long-term prospects for its nascent edge platform, but we believe that the stock is now due for a well-deserved pause," he said.

Earlier this month, Founder Jim Cramer spoke with Matthew Prince, founder, chairman and CEO of Cloudflare on CNBC’s Mad Money.

Prince said that Cloudflare is building a better network and continues its mission of execution and innovation. The company has created more than 1,000 new products over the past two years, but is "still getting started," he said.

“As the world continues to grapple with Covid-19, ensuring that online resources are available will continue to be a global priority,” Stephen Boyce, CEO of digital forensics firm Cyber Doctor, told Cramer on Real Money.

“Cloudflare has been a global leader in making sure online resources are available through its [distributed-denial-of-service] protection services," Boyce said. 

"As more states and countries continue to grapple with data sovereignty, Cloudflare's Data Localization Suite will help customers manage their data locality, privacy, and compliance needs.”