Cloudflare's Stock Rises On Positive Guidance. It Is Still Dealing With A Slowdown In Spending.‍

Cloudflare NET +0.34% stock price increased on Friday as the internet infrastructure provider announced guidance that exceeded Wall Street's forecasts.

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Cloudflare (NET) anticipates profits per share between 3 cents and 4 cents for the current quarter. Analysts polled by Trade Algo were expecting a first-quarter profit of 3 cents. Additionally, the company predicts that the first-quarter revenue is between $290 million and $291 million, an increase from the prior year's sales of $228.2 million. Analysts anticipated revenue of $290 million.

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Cloudflare anticipates revenue between $1.33 billion and $1.34 billion in 2023, above the $1.31 billion predicted by analysts.

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Needham analyst Alex Henderson said on Friday, "NET continues to demonstrate why it's in a class by itself by generating good revenue, ARR [annual recurring revenue], and cash flow outcomes and presenting strong yet clearly cautious forecast." He increased his price objective for the company from $70 to $77 and maintained his Buy rating.

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Cloudflare's stock rose 8.8% in premarket trading on Friday to $63.30. Prior to Friday's trade, the share price had increased by 29% this year.

Cloudflare reported fourth-quarter earnings of 6 cents per share on revenue of $274.7 million. Analysts polled by Trade Algo were expecting earnings of 5 cents per share on sales of $274.1 million. In addition, the firm had 162,086 paying clients during the quarter, a 16% rise over the previous-year period.

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However, similar to other software companies in the industry, the company witnessed a decline in consumer expenditure.

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On the company's earnings call, Chief Financial Officer Thomas Seifert stated, "Economic uncertainty caused businesses to be more cautious with their spending, resulting in longer decision-making processes and, ultimately, longer sales cycles during the quarter, pressuring revenue growth across the technology industry, including Cloudflare."

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J.P. Morgan analyst Mark Murphy raised his price target on the stock from $50 to $53 and wrote in a research note that the company "truly does not expect the demand environment to improve in the near term, but rather, continues to believe that a slow/grinding environment could persist for the next 12 months, which we view as a sensible and grounded view in a higher cost-of-capital environment."

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Murphy maintained his Neutral rating on Cloudflare because he believes that the company's technology and market opportunity are outweighed by a tough business environment and investor sensitivity to macro volatility.