Cloudflare, Inc. (NYSE: NET)

Sector: Technology Industry: Software - Infrastructure CIK: 0001477333
Market Cap 62.78 Bn
P/B 46.60
P/E -609.27
P/S 31.18
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,...

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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 3,563.59 Bn 33.97 12.13 60.56 Bn
2 ORCL Oracle Corp 561.87 Bn 36.43 9.21 124.39 Bn
3 PLTR Palantir Technologies Inc. 413.65 Bn 377.64 106.17 0.24 Bn
4 PANW Palo Alto Networks Inc 126.45 Bn 113.19 13.23 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 116.42 Bn -370.56 25.50 0.82 Bn
6 SNPS Synopsys Inc 86.06 Bn 64.60 12.20 14.29 Bn
7 NET Cloudflare, Inc. 62.78 Bn -609.27 31.18 3.50 Bn
8 FTNT Fortinet, Inc. 60.83 Bn 32.47 9.28 1.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 11.18 2.69
EV to Cash from Ops. EV/CFO 119.84 28.91
EV to Debt EV to Debt 18.48 19.83
EV to EBIT EV/EBIT -754.98 -9.95
EV to EBITDA EV/EBITDA 1,550.19 6.82
EV to Free Cash Flow [EV/FCF] EV/FCF 309.83 26.09
EV to Market Cap EV to Market Cap 1.03 0.36
EV to Revenue EV/Rev 32.14 -9.34
Price to Book Value [P/B] P/B 46.60 3.88
Price to Earnings [P/E] P/E -609.27 -10.66
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -0.30
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.71
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 -14.20
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -96.31 -408.01
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 469.91 226.39
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -7.20 25.27
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 239.34 47.48
EBIT Growth (1y) % EBIT 1y % (Qtr) -5.80 20.13
EBT Growth (1y) % EBT 1y % (Qtr) -8.39 14.16
EPS Growth (1y) % EPS 1y % (Qtr) -15.38 67.50
FCF Growth (1y) % FCF 1y % (Qtr) 22.95 296.60
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 24.22 46.75
Liquidity Ratios Value Ind Avg Percentile
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 1.22
Current Ratio Curr Ratio (Qtr) 2.04 2.59
Debt to Equity Ratio Debt/Equity (Qtr) 2.60 -0.96
Interest Cover Ratio Int Coverage (Qtr) -11.70 -14.20
Times Interest Earned Times Interest Earned (Qtr) -11.70 -14.20
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 7.40 -548.16
EBIT Margin % EBIT Margin % (Qtr) -4.26 -199.84
EBT Margin % EBT Margin % (Qtr) -4.62 -607.20
Gross Margin % Gross Margin % (Qtr) 75.20 51.88
Net Profit Margin % Net Margin % (Qtr) -5.10 -610.00