Cloudflare should be a $65 stock: Wells Fargo

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Cloudflare Inc (NYSE: NET) ended more than 10% up on Monday after a Wells Fargo analyst turned bullish on the content delivery and cybersecurity company.

Cloudflare could climb another 30%

On Monday, Andrew Nowinski upgraded the San Francisco-headquartered firm to “overweight”. He also raised his price objective on the stock to $65 that represents another 30% upside from here.

Nowinski expects the IT services company to be free cash flow positive by the end of this calendar year and “remain above the Rule of 40” moving forward. Uptick in demand was among other reasons cited for the constructive view.

Cloudflare had the best overall results in our 3Q22 Reseller Survey and were +19% net positive (up from +13% in 2Q22). We believe it’s seeing strong demand for Cloudflare One (SASE) platform.

Its better than average growth rate, he noted, was not factored into the stock price.

Why else does he like Cloudflare shares

Shares of Cloudflare are still down 60% for the year, making up for an attractive entry point, the analyst added. He’s convinced the cybersecurity stock stands to gain from “increasing focus on consolidation to reduce costs.”

Cloudflare is scheduled to report its Q3 results on November 3rd. Nowinski forecasts the DDoS mitigation company to report, for the ninth consecutive quarter, a more than 50% year-on-year increase in its revenue.

He expects the $17 billion company to announce significant cost cuts as well. Discussing the bullish call, TD Ameritrade Network’s George Tsilis said:

As long as we see growth relative to sales more than two times, that should speak to a stock that should be trending higher.

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