Cloudflare (NYSE:NET) stock has fallen over 60% on concerns over macro challenges. Despite concerns, it continues to deliver stellar growth and expand its large customer base. Its low share price and ongoing momentum in business create a buying opportunity, noted Wells Fargo analyst Andrew Nowinski. The analyst upgraded NET stock to Buy from Hold and increased the price target to $65 from $62.
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Following the upgrade, Cloudflare stock closed over 13% higher on Monday. Further, it is up about 2% in the pre-market session on Tuesday.
Cloudflare provides cloud-based security services and has consistently delivered over 50% growth in its revenues in the past several quarters. Its revenues have a CAGR of 51% from 2019 to 2021. Meanwhile, its top line increased by 54% in Q2 of 2022.
What stands out is that the growth in NET’s revenue is driven by an increase in its large customer ($100K in annual revenue) base. Its large customer base has increased at a CAGR of 66% between 2019 and 2021. Moreover, it jumped 63% and 61% in Q1 and Q2 of 2022. Cloudflare added a record 212 large customers in Q2. Further, it ended Q2 with 1,749 large customers.
Another key highlight is its ability to retain customers. NET’s dollar-based net retention rate remains high and stood at 126% at the end of Q2.
Cloudflare’s solid growth and low valuation make it attractive at current levels. However, macro weakness could take a toll on its performance and restrict its recovery in the near term.
What is the Price Target for Cloudflare?
Analysts’ average price target of $87.56 indicates a stellar 69.3% upside potential in Cloudflare stock over the next 12 months. Meanwhile, it sports a Moderate Buy consensus rating on TipRanks based on seven Buy and 10 hold recommendations.
Cloudflare stock also has a positive signal from hedge fund managers, who added 2.1M shares last quarter. However, NET stock has a Neutral Smart Score of seven out of 10 on TipRanks.
