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Cloudflare (NET) to Report Q1 Earnings: What's in Store?

Zacks Equity Research
·4-min read

Cloudflare NET is set to release first-quarter 2020 results on May 7.

Notably, the company completed its initial public offering (IPO) in September 2019. Ever since, it has reported two quarterly earnings. In the last reported quarter, the company’s bottom line beat the Zacks Consensus Estimate by 14.3%.

For the quarter, the company expects revenues between $87 and $88 million. The Zacks Consensus Estimate for the top line is currently pegged at $87.3 million, indicating 4.1% growth from the fourth quarter’s reported figure of $83.9 million.

Moreover, the consensus mark for loss has stayed at 6 cents per share over the past 30 days, flat with the fourth quarter’s reported loss figure.

Cloudflare, Inc. Price and EPS Surprise

Cloudflare, Inc. Price and EPS Surprise
Cloudflare, Inc. Price and EPS Surprise

Cloudflare, Inc. price-eps-surprise | Cloudflare, Inc. Quote

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Let’s see how things shaped up prior to this announcement.

Factors to Consider

Cloudflare’s diversified customer base is expected to have aided its first-quarter top-line growth. At the end of 2019, the company had 2.6 million free and paying customers. Moreover, as of Dec 31, 2019, the company had roughly 83,000 paying customers across more than 160 countries.

Large customers (annual billings of more than $100,000) were 550 at the end of 2019. The company’s large customer base witnessed a CAGR of 80% during the 2016-2019 timeframe. This momentum is likely to have continued in the to-be-reported quarter as well on the back of steep demand for its cloud-based solutions amid coronavirus-led remote working wave.

Moreover, the company’s recurring subscription-based business model provides relative stability to its top line despite disruption caused by the coronavirus outbreak.

Additionally, strong demand for security solutions, which became imperative due to aggravated cyberattacks, bring-your-own device policies and a zero-trust approach, is expected to have driven the top line in the to-be-reported quarter.

However, Cloudflare’s significant exposure to small and medium businesses (SMBs), the worst-hit cohort by the coronavirus, is expected to have impeded growth in the to-be-reported quarter.

Key Takeaway From Q1

In January 2020, Cloudflare acquired S2 Systems Corporation, a company that developed patented browser isolation technology to make daily web browsing safer and faster.

What Our Model Indicates

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Cloudflare has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies worth considering from the same sector as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

DISH Network DISH has an Earnings ESP of +17.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inphi Corporation IPHI has an Earnings ESP of +20.04% and is Zacks #2 Ranked. 

Take Two Interactive TTWO has an Earnings ESP of +13.24% and a Zacks Rank of 3.



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