Guggenheim is proving to be a destabilizing influence throughout tech stocks today. Not only did it recently come in with an out-of-nowhere hike for Fortinet (NASDAQ:FTNT), but it also issued a scathing rebuttal for Cloudflare (NASDAQ:NET). The hit to Cloudflare sent investors in a panic for the nearest door, and sent Cloudflare shares diving over 3% in Monday afternoon’s trading.
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Guggenheim, via analyst John DiFucci, pointed to one major problem as he cut Cloudflare from “neutral” to Sell, and to a price target of $50: execution risk. DiFucci goes so far as to note that Cloudflare was always what the cloud should have been all along. However, actually getting there from where Cloudflare is currently was always going to be a challenge. Thus, the “execution risk” DiFucci refers to.
DiFucci didn’t stop there, either. He went on to note that there were going to be challenges ahead at every timespan for Cloudflare, from short-term to long-term and even mid-term. Indeed, DiFucci pointed to Cloudflare’s recent win, and said that that win wasn’t likely to carry over into the remainder of this year. Worse yet, DiFucci cast doubt on Cloudflare’s long-term revenue targets, especially the $5 billion it planned to bring in in 2027. And with Cloudflare trading at over 16 times its expected recurring value, based on reports, that only sets up conditions for a worse fall down the line.
However, even with this, analyst consensus still expects Cloudflare to come out ahead. With eight Buy ratings, seven Hold and three Sell, Cloudflare stock is considered a Moderate Buy. Further, today’s price action has given Cloudflare a slight upside potential. With an average price target of $68.50, Cloudflare stock comes with a 1.51% upside potential.
