Cloudflare Drops Despite Multiple Price Target Upgrades

Cloudflare stock traded lower Friday despite price target upgrades from analysts at Morgan Stanley, KeyBanc, Needham and others.
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Shares of Cloudflare  (NET) - Get Report dropped Friday despite the provider of cloud-based networking and cybersecurity service reporting fourth-quarter results that exceeded Wall Street expectations.

Shares of the San Francisco company fell 6.28% to $85.55 at the last check during trading.

Cloudflare reported an adjusted loss of 2 cents a share, compared with a loss of 6 cents a share year-over-year. Revenue rose to $125.9 million from $83.9 million year-over-year 

Analysts surveyed by FactSet had forecast a loss of 3 cents a share on revenue of $118.3 million.

"Our paid customer count grew to more than 111,000, with our largest customers continuing to be our strongest growth area," said Co-Founder and Chief Executive Matthew Prince, in a statement.

The earnings have sparked a flurry of price target upgrades from Morgan Stanley, RBC Capital Markets, and KeyBanc among others despite concerns about Cloudflare's market cap.

RBC Capital Markets said the outlook was better than expected and the results show “continued significant enterprise customer momentum.”

It raised its price target on the outperform-rated Cloudflare to $100 from $85.

Analysts at Morgan Stanley also raised their price target on the stock to $88 from $81 on the back of underlying fundamental trends as well as a strong runway for growth.

But added that in terms of valuation, “hard to gauge what a good enough quarter is and there is very little room for error," as quoted on Bloomberg.

According to KeyBanc, Cloudflare's outlook implies strong tailwinds for its security portfolio. The price target was raised to $99 from $85.

Needham also raised its price target on Cloudflare to $105 from $75.