NET Stock Is a Winner That Investors Should Snap Up

Internet security company Cloudflare (NYSE:NET) stock continues to outperform the broader stock market indexes as demand for its services grows worldwide.

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On July 19, as the Dow Jones Industrial Average fell more than 700 points (more than 2.09%) and the Nasdaq composite declined more than 1%, NET stock actually rose 3.38% to just under $106 per share.

It was the latest example of how Cloudflare continues to buck broader market trends and rally higher regardless of what is happening with other technology stocks. Year-to-date, Cloudflare’s stock is up 54% to an all-time high. In the past 12 months, the company’s share price has climbed 228%.

Cybersecurity’s Moment

Started in 2009, Cloudflare provides cybersecurity solutions for both corporate and consumer clients, and has earned a reputation for having some of the fastest and most reliable applications in the industry. The cybersecurity work that Cloudflare specializes in has become red hot as corporations around the world move into cloud-based enterprise architectures, adopt Internet-of-Things (IoT) devices, and the remote work trend continues.

Then there was the attack on the Colonial Pipeline.

In the wake of the Colonial Pipeline shutdown, many companies are considering or reconsidering their cybersecurity plan,” wrote Pat Wilbur, cofounder and chief technology officer at Hologram, in an email to InvestorPlace.

Ideally, you have a program in place and adopted technology that allows you to respond very quickly to the incident and a posture that allows you to keep your business running in the midst of an attack rather than shutting down your whole system. Businesses need a cybersecurity plan in place that doesn’t halt all business functions altogether because that’s devastating for your revenue and your customers’ revenue.”

The attack raised the threat level for corporate executives and lawmakers in Washington, placing companies such as Cloudflare in the spotlight. In many respects, this is cybersecurity’s moment in the sun.

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Cloudflare is capitalizing on the moment at hand with strong growth and expansion. In the past five years (since 2016), Cloudflare has grown its revenues, on average, by 50% each year. Despite that exceptional growth, Cloudflare still sees a big market opportunity ahead of it.

The company forecasts that its total addressable market will reach $100 billion by 2024 from $72 billion in 2020 as more companies migrate to cloud computing and IoT adoption accelerates. In short, demand for cybersecurity is only going to grow in coming years.

Strong Fundamentals

In addition to being the right company in the right sector at the right time, Cloudflare has also been outperforming analysts’ expectations and boasts strong fundamentals. In this year’s first quarter, the San Francisco-based company reported a non-GAAP net loss of 3 cents per share, better than a loss of 4 cents reported in the year-earlier period. First quarter revenue rose 51% to $138.1 million, which was better than the $131 million that analysts had forecast for the quarter ended on March 31.

For the second quarter that ended June 30, Cloudflare has forecast a loss in the range of 3 cents to 4 cents per share and sees revenue coming in at $146 million. That guidance outpaces the projected loss of 3 cents and revenue of $139.1 million that analysts had been calling for.

Beyond its strong earnings, rapid growth and march towards profitability, Cloudflare also has a partnership with semiconductor and microchip maker Nvidia (NASDAQ:NVDA) that aims to bring artificial intelligence capabilities to cybersecurity systems in the not too distant future.

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Buy And Hold NET Stock

Cloudflare is a stock that investors should buy and hold for the long run. While many cybersecurity stocks have enjoyed big gains this year, including CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (NYSE:PANW), Cloudflare has beaten them all. And NET stock shows no signs of retreating. Investors can expect Cloudflare to continue outpacing the broader market for the foreseeable future.

With second quarter earnings scheduled to be released on Aug. 5 and profitability on the horizon, now is a good time to buy shares and plan to hold them over the long term. The company now has its cybersecurity solutions deployed in more than 200 cities across 100 countries, and it is integrating its software with Microsoft (NASDAQ:MSFT), Splunk (NASDAQ:SPLK) and others.

Any way you look at it, Cloudflare is moving in the right directions and poised for greater success.

On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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