Cloudflare is the IBD Stock of the Day as the investor buzz over artificial intelligence stocks continues. Cloudflare stock has gained 14% in 2024 and 55% over the past 12 months, though it has retreated from a high of 116 set on Feb. 9.
On April 1, Cloudflare stock slipped 1.2% to close at 95.66.
With the pullback from the Feb. 9 high, investors should look for support at the 50-day moving average. From a traditional technical view, Cloudflare still needs to form a proper base, which could have an entry point of 116.
Aggressive investors can eye an early entry of 100.90, Cloudflare's March 21 high, if it retakes that level.
Started in 2009, Cloudflare speeds up and provides security for web applications routed through its intelligent global network.
In 2023, revenue climbed 33%, rising to $1.296 billion. Analysts polled by FactSet forecast 28% revenue growth in 2024 to $1.654 billion. In addition, Cloudflare has set a long-term goal of $5 billion in annual recurring revenue, or ARR, from subscription-based services.
New Chief Strategy Officer Hired
On the news front, Cloudflare in mid-March hired away a longtime banker at Goldman Sachs, Stephanie Cohen, to become its chief strategy officer.
"Cloudflare's go-to market, product portfolio and management teams have had major upgrades," said Oppenheimer analyst Tim Horan in a recent report. "Cloudflare's new head of sales should help the company see a (material) improvement in new logo wins. The company continues to add impressive new personnel."
The company plans to host an investor day for Cloudflare stock on May 30.
Generative AI has been a hot topic for investors since the emergence of ChatGPT maker OpenAI in late 2022. Further, Cloudflare has ties to OpenAI. Cloudflare provides secure links to cloud services when consumers sign up to use ChatGPT, a conversational chatbot.
Also, Cloudflare has increased investments in AI infrastructure amid an alliance with chipmaker Nvidia.
Cloudflare and rival Akamai Technologies are racing to deploy network gear that supports edge computing — extending cloud services closer to where data is generated. At the same time, Cloudflare is targeting AI "inferencing" — processing AI apps or workloads locally on the network edge.
Cloudflare Stock: Nvidia Partnership
Cloudflare has told analysts it plans to deploy Nvidia AI chips in 300 cities by the end of 2024. The AI networking cards are simply plugged into computer server PCI slots, lowering capital spending needs.
In late September, Cloudflare announced its "Workers AI" platform and partnerships with Microsoft, privately held Databricks and Hugging Face. Hugging Face is among a wave of AI startups building AI training models for apps.
"The company is uniquely bundling networking, security, compute, and now AI all on one edge platform," added Horan. "It will benefit from having unique global AI infrastructure, at a time of expected shortages. Growth in inference will emphasize latency for many applications and result in AI moving closer to the edge."
Cloudflare Stock Technical Ratings
Meanwhile, Cloudflare stock holds an IBD Composite Rating of 94, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Cloudflare stock has an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
For the quarter that ended Dec. 31, Cloudflare earnings were 15 cents a share, up 150% from 6 cents a year earlier. Revenue climbed 32% to $362.5 million, the San Francisco-based company said.
Analysts predicted adjusted profit of 12 cents a share and revenue of $353 million.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
