Cloudflare Just Broke the Internet, But It's Still a Red-Hot Buy

Tech giant Cloudflare Inc. (NYSE: NET) found itself at the center of chaos on Tuesday, Nov. 18, when a global outage knocked many of the world’s biggest companies and most used websites offline. OpenAI’s ChatGPT, Shopify, and other major platforms were hit, reminding investors just how central certain enterprises’ networks have become to the functioning of the modern internet.

Unsurprisingly, then, perhaps, the market’s response was brutal. Cloudflare shares dropped nearly 8% on the day, extending a sell-off that began in early November, which had brought the stock down nearly 30% in just a few weeks. After a run that had Cloudflare printing all-time highs in late October, this reversal is particularly painful. But while headlines focused on the outage, the fundamentals tell a different story.

It remains one of the most important infrastructure companies in tech, and its long-term trajectory is still very much intact. In fact, the sell-off could prove to be an overreaction, one that gives investors an unexpected entry point into a stock that’s been leading innovation at the edge of the internet for years.

Strong Fundamentals Still Define Cloudflare's Story

It must be stated upfront that Tuesday’s chaos overshadowed what had been a stellar run of results. In late October, Cloudflare reported another strong quarter of double-digit growth, with revenue up approximately 30% year-over-year and earnings exceeding expectations. The company came close to breaking even, a significant milestone for a high-growth software name that continues to scale aggressively.

Forward guidance was also upbeat, with management forecasting continued acceleration into next year. CEO Matthew Prince made a point of stating that the company is “shipping capabilities at an unmatched pace,” and that its expanding platform is building “the rails for the next decade of Internet growth.” That confidence is grounded in execution. Cloudflare’s network spans hundreds of cities, while serving literally millions of websites and securing traffic for many of the world’s biggest enterprises.

In short, the company is growing rapidly, approaching sustained profitability, and widening its moat in cybersecurity and performance optimization. Sure, a single outage like this hurts, but it doesn’t change the trajectory. In fact, a very optimistic investor might say it actually underscores just how integral Cloudflare has become to keeping the internet online.

Analysts Are Standing Firm on Cloudflare

On this point, Wall Street clearly agrees. Even before the outage, the stock was already attracting solid bullish coverage from top firms. The team at Oppenheimer reiterated its Outperform rating last week, while Argus also maintained a Buy rating and lifted its price target up to $265, implying roughly 40% upside from current levels.

Even after Tuesday’s drop, analysts have not changed their tune. The team at Bank of America viewed the incident as potentially painful to their reputation but not structurally damaging, noting that the underlying business remains healthy.

These views matter because Cloudflare’s investment case is driven by opportunity, scale and execution. The company sits at the intersection of cloud computing, cybersecurity, and edge networking, three of the most important growth areas in global tech. Its customer retention is considered very high, its developer ecosystem continues to expand, and its AI-enabled network services are gaining traction with all the right kinds of enterprise clients.

Risks and What To Expect Next for NET Stock

Of course, the bulls don’t get a free pass, and the stock’s valuation remains lofty compared to peers. Investors have long paid a premium for Cloudflare’s growth, and that leaves the company little room for error if growth or margins were to slow.

There’s also the question of confidence, especially if this week’s outage proves to be anything other than a one-off. Major enterprise clients may hesitate before committing to new workloads on a platform that just suffered a global outage, and competitors will undoubtedly use it to their advantage. Add in a broader market that’s starting to turn more risk-averse in general as tech valuations cool, and it’s easy to see why some investors might want to sit tight for now.

But those short-term concerns miss the bigger picture. As long as the stock can continue to consolidate above Tuesday’s low around the $188 mark, it should be able to mount a solid recovery rally into the end of the year.

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The article "Cloudflare Just Broke the Internet, But It’s Still a Red-Hot Buy" first appeared on MarketBeat.