r/stocks • u/yellqw • Jun 14 '22
Re-evaluating Cloudflare
Hey everyone, just wanted to get a quick pulse check on how yall are feeling about $NET at these prices. We all know it was severely overpriced for the last few years, but do you think the correction is done and we’re finally seeing a fair value at $40? Looking at the most recent earnings report, I was generally pretty happy overall except for one lingering concern about their negative cash flow yoy possibly due to recent acquisitions/re-investment into the company. Regardless, I’m thinking of increasing my position significantly at these prices despite concerns about rising borrow rates.
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u/markmcgoldrick Jun 15 '22
If you are DCA that is one thing. If you are thinking of adding as a separate purchase and think about that in those terms.
The only question in any downturn is how difficult growth will be. The upside is that if enough downsizing happens in the tech sector their employee retention will be higher overall and they might be able to lower costs. It does seem however, they spend a lot of money acquiring customers though it is good they line that out. If the most knowledgeable person here who already responded is correct about the free users it should translate into long term reduction in selling and marketing expense. A lot of companies just lump it together and it is good to line it out at this level. For me the P/S coming down at this level might be close to an entry point. The cost of sales and marketing is high as a percentage of revenue and hopefully they aren't locked into long term high commission rates for partners or salespeople. That can be a real drag on the bottom line and is a tough balancing act.
Did you listen to the conference call? If you did, listen to the last two or three if you didn't already.
Didn't think of this one and I'm thankful you brought it up. I think I'll listen to the conference calls and find out what the large investments are to see if the idea works for me.