So this sub is already pretty familiar with Cloudflare (NET) the CDN. It's really innovative blah blah and it's the truth whether or not you believe it or not.
The problem is despite being an amazing company the stock might not be a good investment long term for shareholder value….despite growing @ 50%+ every quarter for 11 quarters straight all while keeping long term 75% target margin rates in check! Also if you dig into how the company operates the CEO is amazing and essentially tries to create a bundle of best in suite digital services.
Major problems that balance out the success story:
– Stock based compensation continues to increase by 75%~ every year
(https://www.macrotrends.net/stocks/charts/NET/cloudflare/stock-based-compensation)
– CEO has stated that everything is being reinvested into growth despite the possibility of profitability and won't change anytime soon
– Shares outstanding go up hella significantly but inconsistently based on the past (https://www.macrotrends.net/stocks/charts/NET/cloudflare/shares-outstanding)
– CEO mentions Cloudflare receives upwards of ~110,000 applications to work (so essentially only hires 0.5% of applications they get) -> they have been and will always be a top destination for work and pay well with very team resignation (despite the job hopping that's going on now). So how will the stock suffer if they have to keep up these world class paychecks and benefits in a rising interest rate environment?
This stock seriously feels like the most 50/50 coin toss ever. One of these quarters is going to be the one where it blows up but if you guess too early you lose your money to operating costs. What's your take?
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