Cloudflare Soars on Positive Earnings, Affirming AltIndex's Early Confidence

February 9, 6:31 am

Over the past year, we at AltIndex have consistently championed Cloudflare (NET) as a compelling investment opportunity, a stance that was vindicated by the company's latest earnings report.

Our belief in Cloudflare was rooted in a comprehensive analysis that extended beyond conventional metrics. In April last year, when Cloudflare's stock was trading at $59, we highlighted the company's strong revenue growth, positive feedback from employees and customers, and its burgeoning popularity on search engines and social media. This optimistic outlook was not just a hunch but a reflection of our faith in alternative data insights, signaling Cloudflare's potential for success.

Fast forward to a month ago, and our conviction remained unshaken. We reiterated Cloudflare as a top stock pick, emphasizing its robust financial performance and technological advancements as key drivers for its favorable market position. This was not mere speculation but a well-informed stance, anticipating Cloudflare's trajectory toward market leadership.

A Stellar Earnings Report: Surpassing Expectations

Cloudflare's recent Q4 2023 earnings report was a testament to the company's enduring growth and operational excellence. The company reported adjusted earnings of 15 cents per share, comfortably surpassing the analysts' consensus of 12 cents as polled by LSEG, formerly known as Refinitiv. Revenue stood at $362.5 million against the expected $353.1 million, marking a 32% increase year-over-year — a consistent pace with its growth in the third quarter.

Furthermore, the narrowing of Cloudflare's net loss from $45.9 million in the previous year to $27.9 million is a promising sign of financial health and operational efficiency. Matthew Prince, Cloudflare's co-founder and CEO, underscored this achievement by revealing the signing of the company's largest new customer deal and biggest renewal, setting a new record in annual contract value.

Expanding Horizons: AI, Security Services, and Executive Moves

Prince's announcement about Cloudflare's expansion into artificial intelligence, specifically supplying software developers with GPUs in over 120 cities, surpasses the company's internal target. This strategic move, aimed at deploying inference to GPUs in nearly every city within Cloudflare's global network by the end of 2024, positions the company at the forefront of AI technology accessibility.

The company's focus on selling security services to both companies and government agencies is timely, especially in light of increased cyberattacks. Cloudflare's initiative in this domain underscores the importance of robust cybersecurity measures in today's digital landscape.

Additionally, the appointment of Mark Anderson, former CEO of Alteryx, as Cloudflare's president marks a strategic executive move, poised to enhance the company's leadership and strategic direction.

Looking Ahead

Cloudflare's guidance for Q1 and the full year of 2024 reflects confidence in sustained growth and profitability. The projected earnings and revenue not only meet but in some respects exceed analysts' expectations, highlighting Cloudflare's optimistic outlook and strategic positioning for continued success.

Cloudflare's earnings and stock price also highlight the power of alternative data. Our initial buy signal at AltIndex, based on financial analysis and alternative data insights, was spot on. With Cloudflare's stock now at $114, up from $59 less than a year ago, investors who bought in saw their investment more than double. This increase underscores the power of using alternative data to make more informed investment choices.
We aim to provide our users with similar insights going forward, taking their investment strategy to the next level.

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