Cloudflare shares fell as much as 6% on Monday after a Jefferies analyst cut his price target. He argues expectations for the company's upcoming earnings report may be set too high.
Shares of Cloudflare slumped as much as 6% at the start of the week. As of 1:44 p.m. ET, the stock was still down 3.5%.
The trigger was a bearish note from a Wall Street analyst.
Jefferies lowers its price target
Jefferies analyst Joe Gallo maintained a hold rating but cut his price target to $320 from $350. That still implies potential upside of 14% from Friday's closing price.
Gallo suggests he expects higher demand for Cloudflare's cloud services in the current quarter. However, he believes the bar may be set too high.
Consensus sits above company guidance
Analysts' consensus estimates call for revenue of $739 million, up 32% year over year, and adjusted earnings per share of $0.34, up 26%. Cloudflare's own forecast calls for revenue between $736 million and $737 million and adjusted EPS of $0.34. Wall Street therefore predicts faster sales growth than management's outlook.
The company has beaten consensus estimates in each of the past four quarters. Even so, the source notes there is no way to know how the stock will react to any given report. Cloudflare reports after the market close on Thursday.
Cloudflare shielded customers from a PHP vulnerability
Last month, Cloudflare deployed protective measures against a highly publicized PHP website vulnerability ahead of the public disclosure. PHP is used by roughly 70% of all websites, and according to Cloudflare the flaw could have let hackers access servers, steal customer data and disrupt services.
Reports suggest there were thousands of hacking attempts before the disclosure and millions after it.
Source: The Motley Fool
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