- Cloudflare traded up as much as 22% on Friday after posting earnings on Thursday.
- The cybersecurity company beat consensus earnings and sales in the fourth quarter.
- Inflation adjustments helped stock indexes rise on Friday.
- NET shares may find support closer to the $100 psychological level.
Cloudflare (NET) shares lost just 0.85% after hours, trading at $107, after closing up 19.4% on Friday following much better-than-expected quarterly results reported late Thursday. The cybersecurity firm proved doubters wrong when it produced quarterly revenue that rose 32% year-over-year in the fourth quarter.
Review for consumers Price index Friday’s seasonally adjusted CPI showed December inflation was slightly lower than official data. That sparked a wave of buying on Wall Street, with the S&P 500 advancing 0.57%, while the NASDAQ Composite added 1.25%. The S&P 500 hit a new all-time high on Friday, ending the day above the 5,000 level for the first time at 5,026.
Cloudflare Stock Earnings News
Cloudflare produced adjusted earnings per share (EPS) of $0.15 for the fourth quarter. That was 3 cents ahead of Wall Street analysts.
Revenue was the more interesting feature and Cloudflare did not disappoint. Revenue came in at $362.5 million, while analysts’ consensus was calling for $353 million.
Operating cash flow and free cash flow hit company records in the quarter ending in December. The former reached more than $85 million, while the latter reached nearly $51 million.
The company formerly known as Alteryx (AYX) CEO Mark Anderson as its new president of revenue.
Chief executive Matthew Prince said in a statement: “We had an exceptionally strong fourth quarter […] and we signed both the largest new customer gain and the largest customer renewal ever.”
Management forecast that Cloudflare would post revenue of $373 million in the first quarter and $1.65 billion in full-year 2024. Those numbers were largely in line, but full-year adjusted earnings per share should be closer to 0. $59, above the previous forecast of $0.56.
Cloudflare shares are now trading well above their Wall Street consensus price target of $79. Morgan Stanley came out with a research report that claimed this makes sense due to the current surge in cyber attacks in the second half of 2023.
Cloudflare signed a three-year, $33 million security contract with the U.S. Department of Commerce during the quarter. The total number of customers also increased by 34% compared to the previous year.
Frequently asked questions about the S&P 500 index
The S&P 500 is a widely followed stock price index that measures the performance of 500 publicly held companies and is considered a broad measure of the US stock market. Each company’s impact on the index calculation is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 has achieved impressive returns – $1.00 invested in 1970 would have returned nearly $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
Companies are selected by a committee, unlike some other indexes where they are included based on set rules. Still, it must meet certain eligibility criteria, the most important of which is a market capitalization that must be greater than or equal to $12.7 billion. Other criteria include liquidity, residency, public trading, sector, financial viability, time publicly traded, and industry representation in the United States economy. The nine largest companies in the index account for 27.8% of the index’s market capitalization.
There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use contracts for difference (CFDs) to bet on price direction. In addition, one can buy into index, mutual, and exchange-traded funds (ETFs) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index, and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.
The S&P 500 is driven by many different factors, but primarily the aggregate performance of individual companies as revealed in their quarterly and annual corporate earnings reports. US and global macroeconomic data also contribute as they impact investor sentiment, which when positive drives earnings. The level of interest rates set by the Federal Reserve System (Fed) also affects the S&P 500 because it affects the cost of borrowing, on which many companies are heavily dependent. Therefore, inflation can be a major driver, as well as other metrics that influence the Fed’s decisions.
Cloudflare Stock Forecast
Shares of Cloudflare rose dramatically on Friday and topped their after-hours run on Thursday. However, traders decided to take profits late in the afternoon. That’s why the big gap up has created a red candle on the daily chart: NET stock looks poised to close lower than its open, which is never a good sign.
The cybersecurity stock is likely to decline toward the 161.8% Fibonacci level at $98.85. That’s close to the psychological level of $100 and right where Bernstein analysts have placed their price target, up from $85. Traders will expect resistance from the 261.8% Fibonacci at $111.65.
NET daily stock chart