On Monday, Goldman Sachs revised its price target on shares of Cloudflare Inc . (NYSE: NYSE:) to $89, marking a significant increase from the previous target of $45, while keeping a Neutral stance on the stock. The adjustment follows Cloudflare’s recent quarterly performance, which revealed several positive developments.
The company reported a 40% year-over-year increase in new Annual Contract Value (ACV), alongside improvements in pipeline close rates, sales force productivity, deal sizes, and quarter-over-quarter linearity. Cloudflare’s current Remaining Performance Obligations (RPO) accelerated, growing by 37% in the fourth quarter compared to a 30% increase in the third quarter. Despite a challenging macroeconomic environment, management has noted some easing in budgets, especially within U.S. enterprise segments.
Cloudflare’s Zero Trust product has also gained traction, with the company securing several large customer wins in the fourth quarter. Furthermore, the appointment of Mark Anderson as President of Revenue is expected to bolster Cloudflare’s sales of security and zero trust solutions, as well as its expansion into enterprise markets, leveraging Anderson’s experience from his tenure at Palo Alto Networks (NASDAQ:).
The price target hike to $89 is justified by a valuation of 15 times enterprise value to sales, up from 8 times previously. This valuation is consistent with that of Cloudflare’s best-in-class peers. However, despite the positive outlook and company-specific improvements, Goldman Sachs has maintained a Neutral rating on the stock. The firm suggests that the current valuation already accounts for an optimistic scenario.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Read the full article here