The S&P 500 has come close to doubling since this March 2020, going from 2,304 per share to over $,479 at its peak in mid-August of 2021.
What’s more, this year-and-a-half-long hot streak shows no signs of slowing down after countless companies reported promising second quarter earnings. While plenty of companies have suffered during the COVID-19 pandemic, it’s clear that others have never been doing better than they are right now.
Cloudflare (NET) is one such company that has seen its price per share skyrocket since the onset of the novel coronavirus. In mid-March of 2020, Cloudflare stock was sitting at about $19 a share.
Today, Cloudflare stock goes for $120 a share. That’s nearly six times what it was just 17 months ago. The real kicker is that Cloudflare still has room to grow. In fact, it very well could triple. You just have to look at the signs.
The Rise of the Delta Variant
While plenty of companies are seriously feeling the pressure to readjust business practices to prepare for the rise of the delta variant and other looming variants across the United States, Cloudflare really has little to worry about in this regard.
As a matter of fact, the company — which provides web infrastructure and website security for customers, giving them access to content delivery networks (CDN) and DDoS mitigation services — only stands to benefit from more people returning to work-from-home.
The more people are staying home to avoid the rise of the delta variant, the more online activity there is, which means the more Cloudflare is going to be used by current customers and sought out by potential customers.
Cloudflare is one of the rare companies who could see its stock price continue to rise as the lingering threat of coronavirus hangs above the heads of societies globally.
Excellent Second Quarter Results
Cloudflare’s second quarter came to a close in June of 2021, and the company’s regularly scheduled earnings call revealed several major results: Q2’s revenue was up 53% year over year, coming in at $152.4 million.
This is remarkable not only because of the tough year the nation faced, but also because it shows an acceleration of growth compared to the first quarter of 2021, which had a revenue growth of 51% year over year.
The company also saw a personal record-breaking dollar-based net retention for the second quarter, with revenue brought in from existing clients rising to 124% for Q2. It also added 140 new large customers spending $100,000 or more, bringing Cloudflare’s grand total to nearly 1,100 large customers spending more than six figures each.
All of this great news continues to drive Cloudflare’s year-end projections higher, with financial analysts expecting to see the company bring home around $630 million in revenue by the close of the 2021 fiscal year.
Compare this to a revenue of $431 million in 2020 and $287 million in 2019, and it’s clear to see that Cloudflare’s excellent second quarter results are a sign the company’s not slowing down anytime soon.
The Company’s SDN Model
There’s no doubt these short-term successes are going to be music to Cloudflare stockholders’ ears, but what about the long-term?
How could Cloudflare (NET) realistically going to rise 200% over the next several years?
The answer to the long-term question lies in the company’s software-defined networking (SDN) model. SDN is a fancy way of saying you’re going to use software-based network services in place of network hardware, and it’s a concept at the heart of Cloudflare’s services.
It’s highly scalable, it’s incredibly resilient, and it’s quite flexible — three characteristics that define a company and an SDN model that are built to last.
Not only is it a durable model now, it’s going to continue to be a durable model well into the future, continuing to drive up the company’s stock price to that 200% that’s just within reach.
The Competition’s Shortcomings
Not only is Cloudflare knocking it out of the park with its SDN model, it’s also setting itself apart from the competition.
This is because two of Cloudflare’s biggest competitors in the web infrastructure and website security industries, Akamai Technologies (AKAM) and Limelight Networks, are still opting for hardware-based network models instead of Cloudflare’s software-defined networking model.
Hardware-based network models are more expensive to work with and replace, more cumbersome to try and scale, and far less flexible than the software-defined networking model that Cloudflare relies on to get the job done.
It’s a clear representation of why Cloudflare should continue to dominate this field: the company’s practically on an entirely different level, moving forward toward the future at a record pace.
Cloudflare’s Commitment to Zero-Trust Security
Another reason why Cloudflare could rise 200% before this current decade comes to a close? The company’s dedication to zero-trust security.
With operations in over 200 cities throughout 100 different countries across the planet, Cloudflare is dealing with around 25 million HTTP requests every single second.
Not to mention, the 80.5% of Cloudflare clients using the company’s reverse proxy service via the company’s content delivery networks (CDN) represents 17.5% of all websites on the internet.
With such a significant chunk of websites under the Cloudflare umbrella, it’s worth mentioning the company’s involvement with Secure Access Service Edge (SASE), a novel cloud-native edge security market that refuses to trust any user and constantly verifies all users’ credentials before granting them access to resources.
This new market is expected to be worth nearly $60 billon by 2028, and Cloudflare’s involvement on the ground floor is likely to pay off for the company in a big way.
The Bottom Line: Why Cloudflare Could Rise 200%
When a company grows quickly and exponentially, it’s perfectly reasonable to feel somewhat cautious.
However, when looking at the way Cloudflare has soared during the coronavirus and its variants, the company’s excellent second quarter results, its unique SDN model, its dominance over the competition, and its ongoing commitment to zero-trust security, it’s increasingly clear that Cloudflare’s not done growing yet.
While the company’s stock has already grown more than 600% since March of 2020, it’s quite possible Cloudflare could rise another 200% in the years to come.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.