Home Mutual Funds Cloudflare Stock Plunges as Sales Outlook Disappoints—Monitor This Key Price Level

Cloudflare Stock Plunges as Sales Outlook Disappoints—Monitor This Key Price Level

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Key Takeaways

  • Cloudflare shares plunged in premarket trading Friday after the global cloud services provider issued weaker-than-expected current-quarter sales guidance, even as the company’s first-quarter results came in ahead of analysts’ estimates.
  • Cloudflare grew its customers who generate $100,000 or more in annualized revenue by 33% from a year earlier in the March quarter.
  • The Cloudflare share price finds a confluence of support around $76 from a multi-month horizontal trendline and the 200-day moving average.

Shares in global cloud services provider Cloudflare (NET) fell more than 14% in premarket trading Friday after the company posted a soft current-quarter sales outlook that overshadowed quarterly results that came in ahead of Wall Street expectations.

The San Francisco-based company guided current-quarter revenue of $393.5 million to $394.5 million, with the midpoint of that range sitting below the $394.5 million expected by analysts, sparking investor concerns of slowing top-line growth.

Uncertainty over the macroeconomic outlook has presented challenges for the company in recent months as enterprise customers try to balance managing their online content within more confined technology spending budgets. Cloudflare also faces increasing competition from cybersecurity giants Palo Alto Networks (PANW) and CrowdStrike (CRWD) that offer competitively priced unified solutions for managing multiple applications and websites.

Revenue Boosted by New High-Ticket Customers

For the March quarter, the company reported adjusted earnings of 16 cents per share, nudging ahead of the consensus view pegged at 13 cents a share. Revenue in the period of $378.6 million grew 30% from a year earlier and topped analysts’ average forecast of $373.7 million.

In a bright spot, the company grew its customers who generate $100,000 or more in annualized revenue by 33% from the prior year’s corresponding quarter, taking that cohort’s total count to 2,878.

Revenue growth in the latest quarter was “fueled by a record number of net-new customers year-over-year spending more than $100,000, $500,000, and $1 million with Cloudflare on an annualized basis,” co-founder and CEO Matthew Prince said in the company’s earnings release.

Level to Watch Amid Earnings-Driven Selling

Since gapping above an ascending triangle after posting better-than-expected financial results in February, the Cloudflare share price filled the gap to trade around the initial breakout level leading into the company’s earnings report.

Amid news-related selling, investors should monitor the $76 area, a region on the chart where the price finds a confluence of support from a multi-month horizontal trendline and the closely-watched 200-day moving average.

Cloudflare shares were down 14.1% at $76.46 at around 6:45 a.m. ET.

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As of the date this article was written, the author does not own any of the above securities.

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