- Cloudflare rose as much as 22% on Friday following the release of its earnings report on Thursday.
- The cybersecurity company beat earnings and sales consensus for the fourth quarter.
- Adjustment to inflation readings helped stock indices rise on Friday.
- NET stock could find support near the $100 psychological level.
The actions of Cloudflare (NET) They lost just 0.85% in the post-market, trading at $107, after closing up 19.4% on Friday following a much better-than-expected quarterly earnings report announced late on Thursday. The cybersecurity company proved skeptics wrong by reporting quarterly sales for the fourth quarter that grew 32% year-over-year.
Revisions to the seasonal adjustments of the Consumer Price Index (CPI) showed on Friday that December inflation was slightly lower than the official reading. This triggered a wave of buying on Wall Street, with the S&P 500 gaining 0.57%, while the Nasdaq Composite added 1.25%. On Friday, the S&P 500 hit a new all-time high and ended the day above the 5,000 point level for the first time, at 5,026.
Cloudflare News
Cloudflare posted adjusted earnings per share (EPS) of $0.15 in the fourth quarter. That was 3 cents ahead of Wall Street analysts.
Earnings was the most exciting feature, and Cloudflare did not disappoint. Sales reached $362.5 million, while the analyst consensus expected $353 million.
Operating cash flow and free cash flow hit company records in the quarter ended December. The first reached more than 85 million dollars, while the second reached almost 51 million dollars.
The company appointed the former CEO of Alteryx (AYX)Signal Anderson, new president of earnings.
CEO Matthew Prince said in a statement: “We had an exceptionally strong fourth quarter […] and we signed both the largest acquisition of new clients and the largest client renewal in our history.”
Management predicted that Cloudflare would post sales of $373 million in the first quarter and $1.65 billion in all of 2024. These numbers were largely in line, but full-year adjusted EPS should come in closer to 0.59 dollars, above the previous forecast of $0.56.
Cloudflare shares are now trading well above their Wall Street consensus price target of $79. Morgan Stanley came out with a research note arguing that this makes sense given the current onslaught of cyberattacks in the second half of 2023.
Cloudflare signed a three-year, $33 million security contract with the US Department of Commerce during the quarter. Total clients also increased 34% compared to a year ago.
Frequently asked questions about the S&P 500
What is the S&P 500?
The S&P 500 is a widely followed stock index that measures the performance of 500 public companies and is considered a broad measure of the U.S. stock market. The influence of each company in the calculation of the index is weighted based on market capitalization. This is calculated by multiplying the number of listed shares of the company by the share price. The S&P 500 Index has achieved impressive returns: $1.00 invested in 1970 would have produced a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
How are companies chosen to be included in the S&P 500?
Companies are selected by committee, unlike other indices where they are included based on established standards. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be equal to or greater than $12.7 billion. Other criteria are liquidity, domicile, market capitalization, sector, financial viability, listing time, and representation of the sectors of the United States economy. The nine largest companies in the index represent 27.8% of the index's market capitalization.
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There are several ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFDs) to place bets on price direction. In addition, you can buy index funds, mutual funds and exchange-traded funds (ETFs) that track the price of the S&P 500. The most liquid of the ETFs is the London Stock Exchange ETF. The most liquid of the ETFs is State Street Corporation's SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index and the Chicago Board of Options (CMOE) offers options, as well as ETFs, inverse ETFs, and leveraged ETFs.
What factors drive the S&P 500?
There are many factors that drive the S&P 500, but primarily it is the aggregate performance of its component companies, revealed in their quarterly and annual earnings reports. US and global macroeconomic data also contribute, influencing investor sentiment, which if positive, drives earnings. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500, as it affects the cost of credit, on which many companies largely depend. Therefore, inflation can be a determining factor, as well as other parameters that influence the decisions of the Federal Reserve.
Cloudflare Forecast
Cloudflare stock rose dramatically on Friday, outperforming its post-market move on Thursday. However, investors decided to take profits towards the end of the afternoon. Therefore, the large gap to the upside has resulted in a red candle on the daily chart. NET stock looks poised to close below its open, which is never a good sign.
The cybersecurity company's stock will most likely show a downtrend towards the 161.8% Fibonacci at $98.85. This level is close to the psychological level of $100 and right where the Bernstein analysts placed their price target, raising it from the previous $85. Resistance lies at the 261.8% Fibonacci at $111.65.
NET Daily Chart
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
