Cloudflare's Stock Moves: Highs, Lows, and Future Growth Prospects

Cloudflare's shares have experienced a sharp decline despite positive Q4 results and significant revenue growth. The latest developments indicate both challenges and opportunities for weary investors. A careful evaluation is warranted to discern potential long-term gains.

Date: 18-04-2025

AI Rating: 5

Market Performance
Cloudflare (NYSE: NET) started 2025 strongly but has seen a sharp 39% decline since mid-February, despite an impressive 63% gain earlier in the year. This volatility raises concerns among investors regarding the sustainability of its stock price.
Financial Metrics
Notably, the company reported revenue of $1.67 billion for 2024, marking a 29% increase year-over-year. This growth is promising, especially when considering the large total addressable market (TAM) projected at $222 billion by 2027.
Another positive indicator is the remaining performance obligations (RPO), which surged 36% year-over-year in Q4 of 2024, suggesting that Cloudflare is securing new contracts faster than it can fulfill them. This bodes well for future growth as fulfilled contracts may lead to increased revenue.
Valuation Concerns
Despite these optimistic figures, investors are wary due to Cloudflare's valuation metrics, which stand at 22 times sales and an astonishing 131 times forward earnings. Such high multiples indicate that the stock is considered expensive, especially in a risk-off market environment where capital preservation is paramount. These factors contribute to the view that the stock could experience further volatility, making it a risky investment currently.
AI Market Potential
The expansion into AI offerings, including partnerships to utilize Nvidia’s GPUs, positions Cloudflare well to capitalize on a rapidly growing market. Analysts forecast a continued surge in earnings growth into 2026 and 2027. However, the high initial price could deter immediate investment.
Overall, while a holding or buying opportunity may surface if valuations become more attractive, current metrics suggest caution among investors who prioritize lower-risk ventures.

Stocks: NET NVDA