Cloudflare Stock Surges 19% as S&P 500 Maintains 5,000 Level

Cloudflare’s stock, ticker symbol NET, surged by as much as 22% on Friday following the release of its quarterly earnings report on Thursday. The cybersecurity company exceeded expectations, reporting a 32% growth in sales for the fourth quarter compared to the previous year. Despite a slight decrease of 0.85% in after-hours trading, Cloudflare closed up 19.4% for the day at $107.

The positive momentum was fueled by news of Cloudflare’s impressive financial performance. In the fourth quarter, the company achieved adjusted earnings per share (EPS) of $0.15, surpassing Wall Street estimates by 3 cents. Revenue also exceeded expectations, reaching $362.5 million compared to the forecasted $353 million. Moreover, Cloudflare set records for operating cash flow, surpassing $85 million, and free cash flow, reaching nearly $51 million.

The appointment of Mark Anderson, former CEO of Alteryx (AYX), as Cloudflare’s new president of revenue, further bolstered investor confidence. CEO Matthew Prince expressed satisfaction with the company’s performance, highlighting the signing of their largest new customer win and renewal ever in the fourth quarter.

Looking ahead, Cloudflare provided optimistic sales projections of $373 million for the first quarter of 2024 and $1.65 billion for the full year. Adjusted EPS for the year is expected to be around $0.59, exceeding the previous forecast of $0.56. Despite trading well above the Wall Street consensus price target of $79, Cloudflare’s stock remains supported by its strong growth trajectory and recent cybersecurity contracts, including a significant deal with the US Department of Commerce.

In summary, Cloudflare’s robust financial results and optimistic outlook have propelled its stock price higher, contributing to the broader market’s positive sentiment as major indices, such as the S&P 500, reached new record highs.

S&P 500 FAQS

What is the S&P 500?

The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.

How are companies chosen to be included in the S&P 500?

Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.

How can I trade the S&P 500?

There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.

What factors drive the S&P 500?

Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

Cloudflare stock forecast

Cloudflare stock surged dramatically on Friday, outperforming its run afterhours on Thursday. However, traders decided to take profits toward the late afternoon. That is why the large gap up has produced a red candlestick on the daily chart: NET stock looks poised to close lower than its open, which is never a good sign.

The odds are that cybersecurity stock will trend down toward the 161.8% Fibonacci level at $98.85. This is near both the $100 psychological level and right where Bernstein analysts placed their price target, up from $85. Traders will expect resistance from the 261.8% Fibonacci at $111.65.

NET daily stock chart

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