Cloudflare, Inc. (NET) Stock Analysis and Metrics

Sector: Technology Industry: Software - Infrastructure CIK: 0001477333

Market Cap 60.91 Bn

P/B 45.22

P/E -591.17

P/S 30.25

ROIC (Qtr) 2.81

Div Yield % 0.00

Rev 1y % (Qtr) 30.68

Total Debt (Qtr) 3.50 Bn

Debt/Equity (Qtr) 2.60

About

Cloudflare, Inc., often referred to as Cloudflare, is a technology company that operates under the ticker symbol NET. It is dedicated to building a better internet by offering a variety of products and services that help businesses of all sizes secure, accelerate, and optimize their online presence. Cloudflare's main business activities include providing a range of products and services that cater to the needs of businesses, developers, and individuals. These services include website and application security, performance, and reliability solutions,...

Cloudflare, Inc., often referred to as Cloudflare, is a technology company that operates under the ticker symbol NET. It is dedicated to building a better internet by offering a variety of products and services that help businesses of all sizes secure, accelerate, and optimize their online presence.

Cloudflare's main business activities include providing a range of products and services that cater to the needs of businesses, developers, and individuals. These services include website and application security, performance, and reliability solutions, as well as developer-based solutions and consumer offerings. Cloudflare's website and application security solutions provide customers with a comprehensive suite of products that help protect their online presence from various threats, such as malware, DDoS attacks, and data breaches. Its website and application performance solutions, on the other hand, help customers improve the speed and reliability of their online presence by accelerating content delivery, load balancing, and caching.

Cloudflare's developer-based solutions allow developers to build serverless applications that can scale without the need for infrastructure or operations. Its consumer offerings provide individuals with a fast, private, and secure way to browse the internet. Cloudflare's network is a critical component of its business, with over 310 cities and 120 countries worldwide. The company's network is designed to be efficient, scalable, and flexible, with a single software stack that runs its products globally.

Cloudflare's competitive advantages include its ability to provide a broad range of products and services that cater to the needs of businesses, developers, and individuals. Its distributed and proprietary network, which is built from the ground up as a single software stack, enables the company to move data seamlessly from nearly any point on earth in a fast, efficient, and reliable manner. Additionally, Cloudflare's API-driven products and services allow customers to easily embed its service in their own workflows, making it a popular choice among developers and businesses.

Cloudflare's customers are diverse and include organizations from various industries, including technology, healthcare, financial services, consumer and retail, industrial, non-profit, and government. The company's large customer base is highly diversified, with no single customer accounting for more than 10% of its revenue.

Cloudflare operates in the technology industry and competes in the market for network services primarily across three categories: on-premises network hardware vendors, point solution vendors, and a subset of services provided by traditional public cloud vendors. The company believes that it is positioned favorably against its competitors based on its breadth of network and product features, integrated solutions across security, performance, and reliability, unified control plane across on-premises, cloud, hybrid, and SaaS infrastructure, performance, availability, and effectiveness, network scalability, total cost of ownership, ease of adoption and use, global network coverage, quality of customer support, programmability and extensibility of platform, and independence, reputation, and trust.

Some of Cloudflare's brand names and/or trade names of its products and services include Cloudflare Workers, R2 Object Storage, Workers KV, 1.1.1.1, WARP, and Cloudflare Registrar. These products and services are designed to enable businesses, developers, and individuals to secure, accelerate, and optimize their online presence, making Cloudflare a strong player in the industry.

Price action

Investment thesis

Bull case

Operating cash flow of 540.01M provides exceptional 73.73x coverage of interest expenses 7.32M, showing strong debt service capability.
Tangible assets of 5.59B provide exceptional 8.66x coverage of deferred revenue 644.88M, showing strong service capability backing.
Short-term investments of 2.99B provide solid 3.83x coverage of other current liabilities 781.69M, indicating strong liquidity.
Free cash flow of 208.87M provides exceptional 28.52x coverage of interest expense 7.32M, showing strong debt service ability.
R&D investment of 490.81M represents healthy 0.76x of deferred revenue 644.88M, indicating strong future innovation pipeline.

Bear case

Operating cash flow of 540.01M barely covers its investment activities of (1.68B), with a coverage ratio of -0.32, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Investment activities of (1.68B) provide weak support for R&D spending of 490.81M, which is -3.43x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
Cash reserves of 1.06B provide limited coverage of acquisition spending of (29.44M), which is -35.99x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
Operating cash flow of 540.01M provides insufficient coverage of deferred revenue obligations of 644.88M, which is 0.84x, raising concerns about future service delivery capabilities.
The company's operating cash flow of 540.01M shows concerning coverage of stock compensation expenses of 422.32M, with a 1.28 ratio indicating potential earnings quality issues.

Geographical Breakdown of Revenue (2024)

Contract with Customer, Sales Channel Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Infrastructure

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	MSFT	Microsoft Corp	3,197.34 Bn	26.81	10.47	57.61 Bn
2	ORCL	Oracle Corp	506.93 Bn	48.84	12.87	124.39 Bn
3	PLTR	Palantir Technologies Inc.	341.64 Bn	311.89	87.69	0.24 Bn
4	PANW	Palo Alto Networks Inc	118.39 Bn	105.97	12.39	0.35 Bn
5	CRWD	CrowdStrike Holdings, Inc.	109.19 Bn	-347.56	23.92	0.82 Bn
6	SNPS	Synopsys Inc	76.22 Bn	57.21	10.80	14.29 Bn
7	FTNT	Fortinet, Inc.	62.40 Bn	33.30	9.52	1.00 Bn
8	NET	Cloudflare, Inc.	60.91 Bn	-591.17	30.25	3.50 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	10.44	2.36
EV to Cash from Ops. EV/CFO	111.91	6.76
EV to Debt EV to Debt	17.26	-7.44
EV to EBIT EV/EBIT	-705.01	-6.97
EV to EBITDA EV/EBITDA	1,447.60	7.81
EV to Free Cash Flow [EV/FCF] EV/FCF	289.32	27.96
EV to Market Cap EV to Market Cap	1.03	0.43
EV to Revenue EV/Rev	30.01	32.94
Price to Book Value [P/B] P/B	43.43	3.89
Price to Earnings [P/E] P/E	-567.70	-24.42

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Dividend Coverage Ratio	0.00	0.26
Dividend Payout Ratio % Div Payout % (Qtr)	0.00	2.68
Dividend per Basic Share Div per Share (Qtr)	0.00	0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	0.00	1.68
Interest Coverage Int. cover (Qtr)	-11.70	-11.97

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-96.31	-406.35
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	469.91	220.63
Dividend Growth (1y) % Dividend Growth (1y) %	0.00	-0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	-7.20	19.33
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	239.34	42.98
EBIT Growth (1y) % EBIT 1y % (Qtr)	-5.80	13.70
EBT Growth (1y) % EBT 1y % (Qtr)	-8.39	7.87
EPS Growth (1y) % EPS 1y % (Qtr)	-15.38	68.92
FCF Growth (1y) % FCF 1y % (Qtr)	22.95	306.88
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	24.22	47.85

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.35	0.67
Cash Payout Ratio Cash Payout (Qtr)	0.00	0.01
Cash Ratio Cash Ratio (Qtr)	0.48	1.21
Current Ratio Curr Ratio (Qtr)	2.04	2.59
Debt to Equity Ratio Debt/Equity (Qtr)	2.60	-0.95
Interest Cover Ratio Int Coverage (Qtr)	-11.70	-11.97
Times Interest Earned Times Interest Earned (Qtr)	-11.70	-11.97

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	7.40	-550.34
EBIT Margin % EBIT Margin % (Qtr)	-4.26	-242.82
EBT Margin % EBT Margin % (Qtr)	-4.62	-608.89
Gross Margin % Gross Margin % (Qtr)	75.20	51.79
Net Profit Margin % Net Margin % (Qtr)	-5.10	-611.54

Research Tools

Cloudflare, Inc. (NYSE: NET)