Cloudflare To See Upside From Solid Demand Uptick, Analyst Says Citing 3Q Checks

Wells Fargo analyst Andrew Nowinski upgraded Cloudflare, Inc NET to Overweight from Equal Weight with a price target of $65, up from $62.
Cloudflare shares have declined 65% YTD while NASDAQ declined ~34% YTD, creating a better entry point.
He believed Cloudflare benefited from the increasing focus on consolidation to reduce costs and gain share from point product vendors.
Cloudflare's investments in the channel paid off, as he noted a solid uptick in demand trends in his 3Q22 Reseller Survey.
Finally, Cloudflare will likely generate positive Free Cash Flow in the back half of CY22, and he believed the company would remain above the "Rule of 40" in the future.
The price target multiple is a premium to the peer group average but justified due to higher growth assumptions.
Mizuho analyst Gregg Moskowitz lowered the price target on Cloudflare to $65 from $85 and maintained a Neutral rating.
Software stocks "remain besieged" by high inflation, rising yields, supply chain constraints, currency headwinds, and the ongoing Russia-Ukraine war.
While fundamental checks "have been healthy overall," they have "again picked up indications of uneven demand."
Though he cut the price target, Moskowitz found that software shares have priced in many risks.
Price Action: NET shares traded higher by 14% at $52.09 on the last check Monday.