Cloudflare’s Q2 2022 Earnings Drive Shares Soaring

Cloudflare co-founder and CEO Matthew Prince speaks on stage at TechCrunch Disrupt Berlin on December 12, 2019 in Berlin, Germany.

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cloud flash shares jumped 27% on Friday after the content distribution network and security provider announced second-quarter results and full-year forecast beat analysts’ forecasts.

Revenue grew 54% year-over-year to $234.5 million, maintaining growth from three months earlier, despite the downturn in other areas of the technology industry. Analysts were expecting $227.3 million in revenue, according to Refinitiv.

The company said it added a record number of customers paying more than $100,000 a year and management raised its forecast for 2022, boosting growth by about 48%.

“Our pipeline generation slowed in the first quarter, sales cycles lengthened, and customers took longer to pay their bills,” Cloudflare CEO Matthew Prince told analysts during an earnings call. “We have been monitoring these figures closely throughout the second quarter and have seen that they have all at least stabilized. We haven’t paraded yet, but the numbers are trending in the right direction.”

The results prompted several analysts to raise their share price targets. RBC analysts upped their target and wrote in a note to clients that while no company is recession-proof, Cloudflare is better equipped than others to withstand economic pressure.

Cloudflare is one of several cloud software companies showing increased appeal to investors who left the sector during the first half of the year. Along with Cloudflare, Paylocity as well as ZoomInformation also rose more than 25% in August.

Analysts polled by FactSet now say the average target price is around $92 a share. This is well below Cloudflare’s November record of $217.25, but above the current price of around $73.

Not all analysts are so optimistic. Analysts at Citigroup maintained their Hold Rating and said the stock is “much more demanding on valuation levels compared to our profitable fast-growing companies” such as CrowdStrike, Atlas as well as date-dog.

Despite rising revenue, Cloudflare’s net loss widened to nearly $64 million from $35 million in the year-ago quarter. Prince said the company has changed its “go-to-market message” during the downturn and is focusing on helping customers save money and consolidate “costs from the multiple solution providers behind Cloudflare’s broad platform.”

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