San Francisco-based Cloudflare speeds up and provides security for web applications routed through its intelligent global network. The company competes in both corporate and consumer markets. Cloudflare also offers a wide range of software-as-a-service products that leverage a global cloud network. The network spans nearly 200 cities and interconnects over 8,000 networks globally.
On April 13, Cloudflare announced a partnership with Nvidia (NVDA) that will enable customers to build artificial intelligence-based apps that run on Cloudflare’s security network. Nvidia is an IBD Leaderboard stock.
Cloudflare’s earnings are due out May 6 after the stock market close. Analysts expect the company to lose 3 cents per share on revenue of $131 million. In fact, Cloudflare has yet to have a profitable year. That’s why the stock has a measly 51 Earnings Per Share Rating.
Its loss narrowed in 2020 from the previous year, and analysts expect an even smaller loss of 9 cents a share this year. Cloudflare is expected to become profitable in 2022. But while it’s been unprofitable, the company’s sales growth ranged from 48% to 54% the past eight quarters, according to IBD MarketSmith. That helps explain why the number of funds that own Cloudflare stock has more than doubled since Q2 of 2020.
Cybersecurity Leader’s IBD Stock Ratings
The stock shows a modest C SMR Rating, according to IBD Stock Checkup. The Earnings Per Share Rating tracks a company’s earnings strength. The SMR Rating analyzes a company’s sales, margins and return on equity, and offers a letter grade from A (the best) to E (the worst).
IBD Stock Checkup also shows that Cloudflare stock has a mild 71 out of a perfect 99 IBD Composite Rating, due to a lack of strong fundamentals. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
Stocks To Buy And Watch: Cloudflare Stock
Cloudflare stock is tracing a cup-shape base with a 95.87 buy point, according to IBD MarketSmith chart analysis. Shares are about 9% away from the new entry amid Tuesday’s sharp gains. Keep an eye out for a handle to offer a more risk-optimal buy point. Also, buying before earnings is risky since the stock can gap down on disappointing earnings results. Check out IBD’s options trading strategy around earnings.
A potential flaw is the stock’s lagging relative strength line. It remains off its old highs; however, there is still plenty of time for it to strengthen ahead of a potential breakout. The RS line measures a stock’s price performance vs. the general market. It is the blue line on every IBD chart.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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