- Cloudflare traded up as high as 22% on Friday after releasing earnings on Thursday.
- Cybersecurity firm beat earnings and sales consensus for the fourth quarter.
- Adjustment to inflation readings helped stock indices to the upside on Friday.
- NET stock may find support closer to $100 psychological level.
Cloudflare (NET) stock has lost just 0.85% afterhours, trading at $107, after closing up 19.4% on Friday following a much better than expected quarterly earnings result announced late Thursday. The cybersecurity firm proved the doubters wrong as it produced quarterly sales for the fourth quarter that grew 32% from a year ago.
Revisions to the Consumer Price Index (CPI) seasonal adjustments on Friday showed that December inflation was somewhat lower than the official reading. This sparked a wave of buying on Wall Street, and the S&P 500 advanced 0.57%, while the NASDAQ Composite added 1.25%. The S&P 500 reached a new all-time high on Friday, ending the day for the first time ever above the 5,000 level at 5,026.
Cloudflare stock earnings news
Cloudflare produced Q4 adjusted earnings per share (EPS) of $0.15. That was 3 cents ahead of Wall Street analysts.
Revenue was the more exciting feature, and Cloudflare didn’t disappoint. Sales arrived at $362.5 million, whereas analyst consensus had called for $353 million.
Operating cash flow and free cash flow reached company records in the quarter ending in December. The former arrived at more than $85 million, while the latter reached nearly $51 million.
The company named former Alteryx (AYX) CEO Mark Anderson as its new president of revenue.
CEO Matthew Prince said in a statement: “We had an exceptionally strong fourth quarter […] and signed both our largest new customer win and largest customer renewal ever.”
Management predicted that Cloudflare will see sales of $373 million in Q1 and $1.65 billion for the entirety of 2024. These figures were largely in line, but adjusted EPS for the full year should arrive closer to $0.59, above the prior $0.56 forecast.
Cloudflare stock is now trading well above its $79 consensus price target on Wall Street. Morgan Stanley was out with a research note arguing this makes sense due to the current onslaught of cyberattacks in the second half of 2023.
Cloudflare struck a three-year, $33 million security contract with the US Department of Commerce during the quarter. Total customers also gained 34% from a year ago.
S&P 500 FAQs
The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index 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 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.
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 (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) 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 in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.
Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Cloudflare stock forecast
Cloudflare stock surged dramatically on Friday, outperforming its run afterhours on Thursday. However, traders decided to take profits toward the late afternoon. That is why the large gap up has produced a red candlestick on the daily chart: NET stock looks poised to close lower than its open, which is never a good sign.
The odds are that cybersecurity stock will trend down toward the 161.8% Fibonacci level at $98.85. This is near both the $100 psychological level and right where Bernstein analysts placed their price target, up from $85. Traders will expect resistance from the 261.8% Fibonacci at $111.65.
NET daily stock chart
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