Cloudflare Q4 FY12/23 Earnings Review

Read even if you don't follow Cloudflare. Lot of method stuff in here.

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Not An Easy Call

by Alex King

Cloudflare ($NET) stock has been very good to me in the last 3-4 years. It is hellishly volatile but with care, patience and attention I have chalked up gains repeatedly on multiple long stakes over time, and one short stake (via long dated puts a couple years back) too. For those of you here that are Growth Investor Pro subscribers, I hope you too have been able to bank gains from this name. Here in the Inner Circle service we have the stock as one of five in our High Beta model portfolio.

Why The Company Matters

Sometimes in tech along comes a business that looks like it might just be the real thing, which is to say the company that does something important 10x better and 10x more cheaply than the previous incarnation. In semiconductor that name is Nvidia; in cybersecurity it is Zscaler; in adtech it is The Trade Desk; and so on. Cloudflare might, just might, be one of these companies.

The core of what the business does is to buy servers and place them into other people's datacenters all around the globe, at the logical and oftentimes physical edge of the wide-area network, close to customer sites. The logical network that is created between Cloudflare servers - using rented telecom capacity - then enables the company to offer a family of services, including:

  • Distributed application development tooling (= hosted development environment)
  • Distributed application hosting (= hosted runtime)
  • Accelerated content delivery
  • Secure perimeter placed around client digital assets (servers, applications, data) - a 'zero trust' network security service.

Cloudflare in essence has all the building blocks of the modern Internet. Except that it is undercapitalized vs. the competition - and later to market - it would be spoken of as a competitor to Amazon AWS, Google Cloud, Microsoft Azure, etc.

Its potential is huge.