Cloudflare (NET) best 2023 idea at Cowen, en-route to becoming a leading provider

Cowen reiterated an Outperform rating and $75 price target on Cloudflare (NYSE: NET) shares in a note Friday, stating it is one of the firm's best ideas for 2023.

Analyst Shaul Eyal said the firm is en route to becoming a "leading public cloud provider," and FY23 should be a year of continued healthy performance as Cloudflare lands new logos and expands its product portfolio with current customers.

"In our view, as an integrated global cloud platform provider, NET is a fast-growing public cloud provider in addition to a security provider. For 2022E, our revenue/EPS are in-line with the consensus $975M/$0.11. For
2023E, our revenue of $1,356M is ahead of the consensus is $1,318M; however our EPS of $0.12 is below the consensus $0.15. Our rating is based on valuation rather than estimates, and we believe NET's growth prospects call for a premium valuation vs. peers," wrote Eyal.

In addition, Cowen believes Cloudflare is "positioned to disrupt several market segments" that today account for over $115 billion of TAM, expected to reach $135 billion by 2024.

"NET is positioned to disrupt the networking, security, and telco markets, and opportunities such as serverless compute, IoT and 5G could enable additional growth. NET's long-term model calls for gross margins of 75%-77%, and operating margins of 20%," Eyal explained.

Cloudflare closed Friday's session down more than 2%.

By Sam Boughedda

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