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Today we're going to take a look at the well-established Cloudflare, Inc. (NYSE:NET). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Cloudflare’s outlook and valuation to see if the opportunity still exists.
What's The Opportunity In Cloudflare?
The stock is currently trading at US$132 on the share market, which means it is overvalued by 37% compared to our intrinsic value of $96.54. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Cloudflare’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Check out our latest analysis for Cloudflare
What does the future of Cloudflare look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Cloudflare's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? NET’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe NET should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on NET for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for NET, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.