1. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 53
Share Price as of December 5: $45.69
Cloudflare, Inc. (NYSE:NET) operates as a cloud services provider that delivers a range of services to businesses worldwide. On November 3, Cloudflare posted earnings for the third quarter of 2022, reporting earnings per share of $0.06, missing market estimates by $0.06. The revenue over the period was $253.86 million, up 47.3% compared to the revenue over the same period last year and beating market estimates by $4.02 million. The cloud services offered by the firm are capable of delivering real-time gaming experiences to players at a massive scale. Cloudflare products are one of the reasons why cloud gaming has taken off in the past few years.
On November 7, Baird analyst Shrenik Kothari maintained an Outperform rating on Cloudflare, Inc. (NYSE:NET) stock and lowered the price target on Cloudflare to $67 from $80, highlighting that company is well positioned to navigate the macro and maintain strong growth rates.
At the end of the third quarter of 2022, 53 hedge funds in the database of Insider Monkey held stakes worth $629 million in Cloudflare, Inc. (NYSE:NET), compared to 41 in the preceding quarter worth $541 million.
In its Q3 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Cloudflare, Inc. (NYSE:NET) was one of them. Here is what the fund said:
“We continued to build our position in Cloudflare, Inc. (NYSE:NET) during the quarter as the shares declined with the overall software space and the long-term risk/ reward balance became more compelling. The company reported a strong second quarter, with revenue growth accelerating to 54%, as well as better gross and operating margins. Third-quarter guidance was also ahead of Wall Street expectations. Given Cloudflare’s proprietary network and massive global scale, its software products have a disruptive price-performance advantage over competitors. As the company introduces new products as well as disruptive packaging/pricing, its unit-level economics should continue to improve over time, with the company already well ahead of its long-term gross margin target of 74%, reporting 78.9% for the second quarter. This drives strong cross/upselling activity with customers, reflected in strong net-dollar expansion rates of more than 125%. Indeed, in the most recent quarters, customers purchasing five or more products reached 81% of the base, six or more products reached 70% of the base, and seven or more products reached 58% of the base. Enterprise penetration continues to be a key long-term driver, with 1,749 customers now spending over $100,000 annually with the company, growing 61% and now accounting for over 60% of total revenue. With approximately 152,000 paying customers at the end of last quarter, large enterprise customers still represent just 1% of total paid customers and thus a material growth opportunity in the coming years. We continue to have high confidence in the company’s ability to innovate at a rapid pace (announced 20 new products or enhancements in September alone), package and bundle with disruptive pricing, and take material share in its large and growing addressable markets.”
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