Goldman Sachs boosts Cloudflare rating to Buy citing sales reorganization and leadership

EditorAhmed Abdulazez Abdulkadir
Published 2025-01-02, 05:42 a/m
NET
-

On Thursday, Goldman Sachs (NYSE:GS) shifted its stance on Cloudflare Inc . (NYSE: NYSE:NET), elevating the company's stock rating from Sell to Buy and substantially increasing the price target to $140 from the previous $77. The upgrade reflects a 27% potential upside to the new 12-month price target. According to InvestingPro analysis, Cloudflare appears overvalued at current levels, with the stock trading at a significant premium to its Fair Value.

Goldman Sachs' analyst highlighted the previous Sell recommendation was based on the expectation of slower revenue growth post-COVID normalization and the anticipation that Cloudflare's expansion in network security and enterprise markets would face delays and higher costs. However, since the stock was added to the Sell List on February 14, 2023, Cloudflare's shares have risen by 59%, compared to the Nasdaq's 68% and the S&P 500's 43% increase. Notably, Cloudflare has also outperformed the cybersecurity-focused ETF HACK by 2%.

The revision of the price target and rating comes after Wall Street analysts adjusted their 2024 and 2025 revenue estimates for Cloudflare downwards by 7% and 13%, respectively. The company has responded by reorganizing its sales force, which is expected to drive positive free cash flow revisions.

Additionally, there is growing optimism surrounding the impact of new leadership hires projected over the course of 2024. InvestingPro data reveals the company maintains a healthy financial position with a current ratio of 3.37, indicating strong liquidity to meet short-term obligations. For deeper insights into Cloudflare's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

The analyst's commentary also points to Cloudflare's progress in the network security sector, particularly in Secure Access Service Edge (SASE), and its efforts to penetrate the enterprise market as reasons for the improved outlook. These developments have contributed to the more bullish view of the company's future performance.

Cloudflare's stock performance and the company's strategic adjustments have led to a more favorable assessment by Goldman Sachs. The raised price target and upgraded rating reflect the firm's increased confidence in Cloudflare's growth trajectory and market positioning.

In other recent news, Cloudflare has been a focal point of several analyst upgrades and positive forecasts. Baird maintained its Outperform rating on the company, highlighting its position as a fast-growing cybersecurity vendor with an anticipated revenue growth of approximately 26% in 2025. Stifel upgraded Cloudflare from Hold to Buy, reflecting confidence in the company's potential for sustained top-line growth and improving profitability. In addition, Morgan Stanley (NYSE:MS) upgraded Cloudflare from Equal-weight to Overweight, citing growth factors that could accelerate revenue throughout 2025.

Citi maintained its Neutral rating on Cloudflare, noting the company's Pool-of-Funds deals are encouraging significant purchases and improving visibility among large enterprises. The firm believes that revenue headwinds from these deals are expected to diminish by 2025, contributing to Cloudflare's aspirations to achieve $5 billion in revenues.

Cloudflare's impressive growth trajectory is supported by its current revenue growth forecast of 28% for FY2024. The company reported a 28% year-over-year increase in Q3 revenue, reaching $430.1 million, and a significant rise in its customer base, now standing at 3,265. Cloudflare anticipates continued growth in sales capacity and productivity, with Q4 2023 revenue projections indicating a 25% year-over-year increase.

These are recent developments that investors should keep an eye on as they provide insight into Cloudflare's financial performance and future growth prospects. The company's robust standing in the field of artificial intelligence, coupled with its improved go-to-market execution, continues to support its premium valuation and promising future.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.