Cloudflare Shares Rise After Wells Fargo Upgrade to Overweight By Investing.com

By Senad Karaahmetovic

Wells Fargo analysts upgraded shares of Cloudflare (NYSE:) to Overweight from Equal Weight with a price target of $65 per share, up from $62.

The analysts outline four factors that prompted them to upgrade NET shares to Overweight.

1. Shares are down 65% YTD, creating a better entry point;
2. We believe Cloudflare is benefiting from the increasing focus on consolidation to reduce costs and gaining share from point product vendors;
3. Cloudflare’s investments in the channel are paying off; and
4. Cloudflare is expected to generate positive Free Cash Flow in the back half of CY22, and we believe the company will remain above the “Rule of 40” going forward.

The third takeaway comes from the Q3 reseller survey results that showed the focus on the reseller community is already paying off.

“Cloudflare had the best overall results in our 3Q22 Reseller Survey and were +19% net positive (up from +13% in 2Q22). We believe the company is seeing strong demand for the Cloudflare One (SASE) platform, as 26% of resellers noted Above Plan results (up from 16% in 2Q22). Refer to page 2 for more details from the 3Q22 Reseller survey,” analysts wrote in a client note.

They also estimate that Q3 revenue growth will remain above 50%.

Cloudflare shares are up nearly 9% today.