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Why Cloudflare Stock Gained in a Down Market Today

What happened

The market is seeing some brutal selling momentum in Monday's trading, but Cloudflare (NYSE: NET) is currently in the green. The cybersecurity stock was trading up roughly 2.9% as of 3 p.m. ET today.

Investors have been faced with mounting risk factors lately, and concerns that Russia could soon invade Ukraine added another negative catalyst to prompt major risk-off sentiment Monday. While the overall market saw steep sell-offs, rising cybersecurity threats related to international conflicts could actually be a bullish catalyst for the company. The stock may also be benefiting from recent positive coverage from a high-profile analyst.

Image source: Getty Images.

So what

Credit Suisse analyst Phil Winslow published a note on Cloudflare stock last Friday raising his rating on the stock from neutral to outperform. However, in light of recent turbulence for the stock, the analyst also lowered his one-year price target on it from $205 per share to $140 per share. Even so, that target suggests roughly 56% upside on the stock based on its current share price.

Cloudflare started Monday participating in the big market sell-off, and the stock was down as much as 9.5% at one point in the day's trading. However, sell-offs for some companies started to moderate as the day progressed, and Cloudflare has battled back to trade in positive territory. Even with market-defying gains in an otherwise brutal day of red, the company's share price is still down roughly 31% year to date and 59% from the lifetime high that it hit in November.

NET data by YCharts

Now what

The company is set to publish its fourth-quarter results after the market closes on Feb. 10. With its last update, management guided for Q4 sales to come in between $184 million and $185 million and a non-GAAP (adjusted) earnings performance between breakeven and a loss of $0.01 per share.

Cloudflare now has a market capitalization of roughly $29 billion and is valued at approximately 33 times expected sales in 2022. The company is a leading provider of web security and content delivery network services and has a very favorable long-term demand outlook, but the stock's growth-dependent valuation sets the stage for potentially volatile swings in the near term.

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Keith Noonan owns Cloudflare, Inc. The Motley Fool owns and recommends Cloudflare, Inc. The Motley Fool has a disclosure policy.


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