Shares of Cloudflare Inc.
dropped 3.4% in premarket trading Friday, after Oppenheimer downgraded the cyber security company, citing valuation and increasing competition. Analyst Timothy Horan, cut his rating to perform, after being at outperform since he started coverage in October 2019, a month after the company went public. He removed his $130 price target, which the stock has already surpassed. The stock, which closed at a record $136.97 on Wednesday, has soared 78.5% year to date, while the ETFMG Prime Cyber Security ETF
has gained 11.8% and the S&P 500
has advanced 18.5%. Horan said competition is slowing increasing, in particular from Microsoft Corp.
and Amazon.com Inc.
and he believes consensus analyst estimates are too high due to content delivery network (CDN) price competition. “We have been one of the biggest bulls on Cloudflare and continue to be very positive on the long-term prospects for its nascent edge platform, but we believe that the stock is now due for a well-deserved pause,” Horan wrote in a note to clients.