Cloudflare, a cloud computing company that offers application, network, and security services, has been upgraded by Morgan Stanley analysts Hamza Fodderwala and Keith Weiss. The stock is expected to see significant upside in 2025, with the possibility of reaching $175 per share, representing a 55% increase from its current price.
Investors may overlook Cloudflare due to less media coverage compared to other companies like Nvidia and Cloudflare’s “Magnificent Seven” peers. However, the company has several advantages that make it an attractive investment opportunity. Its fast cloud network and handling of approximately 20% of all internet traffic give it a competitive edge in the content delivery and edge development platforms markets.
Cloudflare also benefits from its scale, which provides insight into performance problems and security threats across the internet. This data informs routing decisions and threat detection, creating a network effect that drives continuous improvement in network performance and security.
The company has a strong presence in the application, network, and security services markets, with 45% of Fortune 500 companies as customers. Its addressable market is valued at $176 billion in 2024, but management expects it to reach $222 billion by 2027.
Cloudflare powers 80% of the top 50 generative artificial intelligence products and has a potentially important partnership with Apple, playing a behind-the-scenes role in Apple Intelligence by encrypting AI queries. Wall Street estimates Cloudflare’s adjusted earnings will grow at 36% annually through 2027.
However, some analysts question the valuation, considering it to be expensive, especially with current estimates suggesting an adjusted multiple of 160 times earnings. As such, investors may want to wait for the price to fall before investing, but those comfortable paying a premium can consider buying a few shares.
Source: https://www.fool.com/investing/2024/12/15/1-monster-stock-buy-ai-next-phase-2025-wall-street