We recently published a list of 10 Buzzing AI Stocks on Latest News and Analyst Ratings. Since Cloudflare, Inc. (NYSE:NET) ranks 9th on the list, it deserves a deeper look.
Investors are still digesting the Fed’s aggressive rate cut and charting the path forward. Roger Altman, Evercore founder and senior chairman, said while talking to CNBC in a latest program that the Fed was not “behind the curve” but it went with a higher-than-expected rate cut amid labor market concerns.
Asked if he thinks we are headed toward a soft landing scenario, Altman said yes, as he believes growth is “resilient” and corporate profit outlook is good. Altman said equity markets are headed to have their best year since 1960.
“If the landing is finished and the Fed hits its target, Powell will deserve an A and it would be a pretty miraculous achievement,” Altman said.
While the analyst believes currently it’s a “near perfect” overall environment for the market, he did point to “storm clouds” gathering over the international stage including the expanding crisis in the Middle East, Russia’s war on Ukraine and America’s overall fiscal situation.
For this article we chose 10 trending AI stocks based on latest news and analyst ratings. With each company we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Cloudflare Inc (NYSE:NET)
Number of Hedge Fund Investors: 39
Cloudflare Inc (NYSE:NET) is an interesting name in the AI race that often goes unnoticed. Thanks to its inference service for AI called Workers AI, the company is making forays to monetize the AI boom.
How can Cloudflare Inc (NYSE:NET) benefit from AI. Being a key internet and Cloud infrastructure company, Cloudflare is positioned to benefit from the huge spending in AI. For example, Apple is launching a Private Cloud Compute (PCC) infrastructure to integrate AI features into its devices. Apple’s PCC will use its own silicon and employ RSA Blind Signatures for secure connections, relying on third-party providers like Cloudflare Inc (NYSE:NET) for encrypted communication. Morgan Stanley analysts estimate Cloudflare could generate up to $100 million annually from handling Apple’s AI queries.
Last month the company posted strong quarterly results and outlook, prompting Guggenheim to raise its price target.
Analyst John DiFucci of Guggenheim noted that Cloudflare Inc (NYSE:NET) business showed signs of a turnaround after more than a year of slowing momentum. The company reported an 11% increase in adjusted new annual recurring revenue, following declines in the previous two quarters. DiFucci attributed the improvement to changes in Cloudflare’s go-to-market strategy and growth in its enterprise deals, particularly those involving Cloudflare Workers.
“We’ve always respected Cloudflare Inc (NYSE:NET) vision and product lineup but questioned if its product-led approach was right as it targeted larger markets,” DiFucci wrote. He added that while this quarter’s results are positive, it’s too early to call it a lasting trend.
However, DiFucci maintained a Sell rating on the stock but raised the price target from $50 to $57.
Baron Fifth Avenue Growth Fund stated the following regarding Cloudflare, Inc. (NYSE:NET) in its Q2 2024 investor letter:
“Cloudflare, Inc. (NYSE:NET) provides content delivery network services, cloud cybersecurity, denial-of-service mitigation, Domain Name Service, and ICANN-accredited domain registration services. Shares fell 14.4% during the quarter on remarks from the CEO about worsening macro conditions, citing the negative impact of geopolitical uncertainties on customer buying behavior. On the positive side, the company posted strong quarterly results with revenue growth of 30% year-over-year, showing evidence that the changes to the company’s go-to-market strategy were resonating with solid growth across its large customer cohorts (revenues from customers spending over $100,000 represented 67% of the total, up from 62% in the first quarter of 2023), double-digit improvement in sales productivity, and new pipeline attainment ahead of plan. Cloudflare reiterated revenue guidance for the year on resilience in cybersecurity spend. While we fine-tuned our model on the back of the company’s increased macro headwind commentary, pushing out revenue reacceleration estimates from the second quarter of 2024 to the first quarter of 2025, this is still ahead of guidance. We retain conviction in the long-term thesis: a strong founder-led business with a unique global network and significant pricing advantages powering a disruptive multi-product growth story with improving margins. We therefore remain shareholders.”
Overall, Cloudflare, Inc. (NYSE:NET) ranks 9th on Insider Monkey’s list titled 10 Buzzing AI Stocks on Latest News and Analyst Ratings. While we acknowledge the potential of Cloudflare, Inc. (NYSE:NET), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
