Cloudflare Stock Soars Following Goldman Sachs Upgrade
A Shift in Focus: From Point Products to Platforms
Cloudflare Inc (NYSE:NET) shares are surging today, thanks to a significant upgrade from Goldman Sachs analyst Gabriela Borges. The analyst has boosted the stock’s rating from Sell to Buy, accompanied by a substantial price target increase from $77 to $140.
The Power of Platforms
Borges attributes the security stock’s performance in 2024 to the market’s perception of each company as either a platform or a point product. This distinction has significant implications for Cloudflare’s future growth prospects.
Catalysts for Success in 2025
The analyst has identified two key catalysts that could drive Cloudflare’s stock in 2025. Firstly, the company’s sales and marketing productivity cycle is expected to improve, following two years of evolution to better address platform sales in the enterprise. Secondly, Cloudflare’s Act III products for developer services are gaining traction, particularly in AI inferencing use cases, where the company’s core edge network architecture advantages come into play.
Raising the Bar: Revenue Estimates and Price Target
The price target boost reflects a significant jump in the multiple from 11x to 20x (Q5-Q8 revenue), resulting in a 2% increase in the analyst’s 2026 revenue estimates. Borges has also revised her EPS estimates for 2024, 2025, and 2026 to $0.75, $0.90, and $1.32, respectively, driven by slightly more margin expansion.
Check Point Software Technologies: A Year of Investment
In contrast, Borges has downgraded Check Point Software Technologies (NASDAQ:CHKP) from Buy to Neutral, while raising the price target from $204 to $207. The analyst believes 2025 will be a year of incremental investment for Check Point, as its new CEO evaluates growth priorities and ramps up its new SASE products.
Growth Prospects and Valuation
Borges notes that EPS growth will be under pressure in 2025, and the stock typically tracks EPS growth. However, he sees an opportunity to become more positive into 2026, as the path to 10%+ revenue growth and 20%+ EPS growth comes back into focus if Check Point successfully converts incremental investments into incremental revenue growth. The analyst has revised her EPS estimates for 2024, 2025, and 2026 to $9.10, $9.45, and $10.65, respectively.
Price Actions
NET stock is up 4.59% at $112.62, while CHKP is down 0.80%.
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