CloudFlare is a high flying tech stock trading at nose bleed valuations. Even despite losing 50% of its valuation since November 2021, it is still trading at huge valuations. This earnings is a Q4 earnings and will be for the entire FY2021.
What can we expect?
NET's Q3 earnings was here: https://cloudflare.net/news/news-details/2021/Cloudflare-Announces-Third-Quarter-2021-Financial-Results/default.aspx
They project Q4 earnings:
- Total revenue of $184.0 to $185.0 million
- Non-GAAP income (loss) from operations of $(1.0) to $0.0 million
- Non-GAAP net income (loss) per share of $(0.01) to $0.00, utilizing weighted average common shares outstanding of approximately 320 million for a net loss per share, and approximately 345 million for a net income per share
For the full year fiscal 2021, we expect:
- Total revenue of $647.0 to $648.0 million
- Non-GAAP loss from operations of $10.5 to $9.5 million
- Non-GAAP net loss per share of $0.06 to $0.05, utilizing weighted average common shares outstanding of approximately 312 million
So will they finally go profitable? That will be the big question that I believe most investors are eyeing. And obviously revenue growth.
Again, this will all be based on guidance as NET hasn't changed any of their guidance over teh past year yet their stock has gone from $75 in Jan 2021, to a peak of $90 in Feb 2021 before cratering to $67 and then making a HUGE rally to $220 before finally falling to $80 and settling now at $100-ish.
Even at $100, NET is trading at a P/S of 50 without profitability.
Betting on NET is betting on the future of the internet. Bad guidance or outlook will crater NET into the $30's as the P/S and forward P/E ratios will punish them.
PROS:
- High customer retention rates with large customer growth over 70%
- Well reviewed product and industry leading security/hosting technology
- Constantly releasing new products to expand revenues sources
CONS:
- Does it really have a technology moat? Advocates say yes, for sure. Detractors believe that AWS or MSFT's Azure could quickly squash them if they wanted.
- Insane valuation leaving very little room for faltering
I wouldn't buy NET into earnings, but I would hold through earnings if you already have it.
NET itself is a great company but at a risky price currently. NET isn't going anywhere in the next 10 years, and it could easily be a 100Bn company in 5 years based on some of the investments they're doing. They're a combination of AWS, AKAM and FireEye combined.
Also, their leadership is trustworth (Matt Prince). Just be prepared for volatility and manage your risk appropriately.
Managing risk means understanding that NET may still do well in earnings but slide into the $70 price range.
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