Goldman Sachs Raises Price Target on Cloudflare Inc. as Company Reports Positive Quarterly Performance
Goldman Sachs has revised its price target on Cloudflare Inc. to $89, indicating a significant increase from the previous target of $45. The revision comes after Cloudflare’s recent quarterly performance revealed a number of positive developments. Despite this, Goldman Sachs has maintained a Neutral stance on the stock.
One of the key highlights of Cloudflare’s quarterly results is a 40% year-over-year increase in new Annual Contract Value (ACV). This is coupled with improvements in pipeline close rates, sales force productivity, deal sizes, and quarter-over-quarter linearity.
Cloudflare’s current Remaining Performance Obligations (RPO) have also seen a notable acceleration, growing by 37% in the fourth quarter compared to a 30% increase in the third quarter. These results demonstrate the company’s ability to thrive in a challenging macroeconomic environment.
Furthermore, Cloudflare’s Zero Trust product has gained traction, securing several large customer wins in the fourth quarter. The company’s recent appointment of Mark Anderson as President of Revenue is also expected to boost sales of security and zero trust solutions, as well as aid in the expansion into enterprise markets. Anderson’s experience from his tenure at Palo Alto Networks positions him well to drive growth for Cloudflare.
Goldman Sachs justifies the price target hike to $89 with a valuation of 15 times enterprise value to sales, up from 8 times previously. This valuation aligns Cloudflare with its best-in-class peers. However, despite the positive outlook and company-specific improvements, Goldman Sachs maintains a Neutral rating on the stock. The firm suggests that the current valuation already reflects an optimistic scenario.
Analyst comment
The news is positive. As an analyst, I expect the market to react positively to Goldman Sachs’ price target revision and Cloudflare’s positive quarterly performance. The increased price target indicates significant potential for growth, and the company’s positive developments suggest continued expansion in the market. However, the Neutral rating from Goldman Sachs may limit the immediate impact on the stock.
