What Happened?

Shares of internet security and content delivery network Cloudflare (NYSE:NET) jumped 7.7% in the afternoon session after Oppenheimer analyst Timothy Horan maintained a Buy rating on the stock with a $110 price target. This is the latest in a string of positive sell-side notes after a strong quarter. For example, a note from Morgan Stanley last week called out an exciting 2025, saying that "a ramping salesforce, new leadership and growing contribution from Workers/Edge AI could drive upside to estimates". 

Separately, data analytics software provider Snowflake (NYSE:SNOW) reported impressive third-quarter results, which surpassed analysts' revenue, profit, and earnings expectations. The strong quarter is boosting sentiment in the software as a service (SaaS) space. 

Separately, cybersecurity software platform Palo Alto Networks (NASDAQ:PANW) reported solid third-quarter results, which beat across most of the key operating metrics. Remaining performance obligations (RPO - a leading revenue indicator), annual recurring revenue (ARR), and margins all exceeded Wall Street's estimates. This shows that spending on cybersecurity is healthy.

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What The Market Is Telling Us

Cloudflare’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 8 days ago when the stock gained 8.3% on the news that a Citi analyst updated the stock's price target from $90 to $95. The analyst noted that the Q3'2024 earnings included "encouraging qualitative generative AI commentary and traction in Cloudflare's PoF (Proof of Funds) deals." Since the company reported results on November 7th, 2024, and the stock retreated, several Wall Street analysts have defended. They pointed out that the quarter was solid and that future prospects, especially the Workers Edge AI platform, are bright.

Cloudflare is up 31.2% since the beginning of the year, and at $104.09 per share, it is trading close to its 52-week high of $107.92 from February 2024. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $5,998.

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