Cloudflare Stock Forecast: NET explodes 20% higher as market reassesses better growth prospects

Cloudflare (NET) stock is up more than 20% at $70.31 in Friday's premarket after raising guidance that blew wind back into the sales of this once leading growth stock. On the cybersecurity company's earnings call on Thursday evening, Cloudflare broke even on adjusted earnings, beating the Wall Street average forecast by a penny. Revenue drifted upward to $235.5 million, which outdid the consensus of $227.3 million.

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What made the stock go berserk after-hours, however, was management raising guidance for full-year revenue from an anticipated $957 million from prior guidance to a midpoint forecast of $970 million. With few companies raising guidance this quarter due to perceived weaknesses in business and consumer spending, as well as inflationary and recessionary worries, Cloudflare stuck out like a sore thumb... made of gold. 

Company executives said the long-loss-running titan would achieve positive free cash flow in the second half of the year and produce full-year adjusted EPS of 3 to 4 cents. Profits are very welcome, no matter how small, in this climate of rising interest rates, and so these facts likely ushered in more of the market's euphoria.

Revenue rose 54% YoY, and Cloudflare added 212 million large customers for a total of 1,749. These are customers with contracts worth more than $100,000 annually.

"These large customers now represent 60% of our revenue, up from 50% six quarters ago," said CEO Matthew Prince. "This trend illustrates how large, established enterprises increasingly form the foundation of Cloudflare's business. In fact, today, 29% of the Fortune 1,000 are already paying Cloudflare customers, a nearly threefold increase over when we went public less than three years ago."

Cloudflare stock forecast

Cloudflare stock is back near the high from May 6, the day after NET shares gapped down on poor Q1 results. That high was $70.15, and NET shares in the premarket are currently closer to $68 after making a run for that barrier. 

NET stock has gapped up from Thursday and could eventually make a run at the $76 level from the initial gap down from the May 5 low. The Moving Average Convergence Divergence (MACD) indicators is trending in the correct direction by recently crossing above the zero threshold.

NET stock support is at $48 from the ascending bottom trend line, and long-term support is at $39. 

NET daily chart