Cloudflare’s Price Target Raised at Goldman Sachs

Goldman Sachs analysts increased the price target for Cloudflare (NYSE:NET) to $89 from the previous $45, while maintaining a Neutral rating. The analysts admitted to underestimating the stock's performance over the past year but pointed to several positive aspects in the company's recent quarterly commentary. These include a 40% year-on-year increase in new Annual Contract Value (ACV), with noticeable improvements in pipeline close rates, sales force productivity, deal sizes, and quarter-over-quarter sales linearity.

The report also highlighted an acceleration in Current Remaining Performance Obligations (RPO) growth to 37% in the fourth quarter from 30% in the third, despite a challenging macro environment and signs of budget easing, particularly within US enterprises.

Cloudflare's Zero Trust product has seen significant customer adoption in the fourth quarter. Additionally, the appointment of Mark Anderson as President of Revenue is expected to strengthen Cloudflare's sales of security/zero trust solutions and its engagement with enterprise customers, leveraging his experience from Palo Alto Networks.

Despite the increased optimism, the Neutral rating is reiterated as the analysts believe the current valuation fully encapsulates a highly optimistic scenario.