Why Is NET Up Today?

Shares of Cloudflare shot up to $90.03 during today's afternoon trading session -- an increase of 8.0% that brings the stock 15.58% over its average analyst target price of $77.9. This may imply limited upside for the Software stock, whose analysts give it a consensus rating of hold, and target prices spanning from $45.0 to $110.0 dollars per share.

Cloudflare's short interest can give us an idea of what future price movements the market expects from the stock. The short interest is the percentage of shares that are tied up in short positions, which will provide gains to the investor only if the stock price falls. The stock's short interest is 6.0% which seems to indicate a mixed sentiment on NET

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

Another way to gauge the sentiment on Cloudflare is to look at the percentage of institutions that are invested in the stock. In this case, 87.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

Overall, there is mixed market sentiment on Cloudflare because its an analyst belief that shares are overpriced, a hold rating, an average amount of shares sold short, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are NET's recent cash flows:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023 247,088 123,725 123,363 716.48
2022 123,595 143,606 -20,011 29.38
2021 64,648 92,986 -28,338 61.45
2020 -17,129 56,375 -73,504 10.59
2019 -38,917 43,289 -82,206
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.