Cloudflare Earns an Upgrade at Oppenheimer

Analysts at Oppenheimer upgraded the rating for Cloudflare (NYSE:NET) from Perform to Outperform, setting a new price target of $85.00.

The analysts explain that after previously downgrading Cloudflare about two years ago, they now see a positive shift in the company's prospects. They believe Cloudflare is strategically positioned to deliver edge computing on a large scale. This capability is anchored in their consolidated approach, integrating compute, security, and networking into a single infrastructure. This integration facilitates a unified developer platform known as 'Workers'.

Furthermore, Cloudflare is expanding its offerings by deploying an AI infrastructure on this platform, referred to as Workers AI. This initiative, which is less than two months old, is already attracting substantial interest and demonstrating a wide array of use cases, appealing to both small startups/developers and large enterprises.

While acknowledging concerns about near-term gross margins and free cash flow (FCF) compression, the analysts highlighted the company's long-term revenue potential, bolstered by enduring AI-related tailwinds.