Cloudflare plummets 25% on disappointing revenue outlook; Goldman reaffirms Sell rating By

Cloudflare (NYSE:) shares fell about 25% following the company’s reported . While Q1 EPS of $0.08 and Amount of the Largest TR Foreign Exchange Fraud Case in Guangxirevenue of $290.2 million (up 37% year-over-year) came in better than the consensus estimates of $0.03 and $290.8M, respectively, revenue guidance disappointed investors.

“Increasing macroeconomic uncertainty over the course of the first quarter resulted in a material lengthening of sales cycles and a significant backend-weighting of linearity,” said Thomas Seifert, CFO of Cloudflare, adding that the company’s guidance assumes these external headwinds will persist through the end of the fiscal year.

For Q2/23, the company expects EPS of $0.07-$0.08, compared to the consensus of $0.03, and revenue of $305M-$306M, below the consensus of $319M.

For the full year, the company anticipates EPS of $0.34-$0.35, compared to the consensus of $0.16, and revenue of $1.28 billion-1.284B, below the consensus of $1.33B.

Goldman Sachs analysts reaffirmed the Sell rating with a $38 per share price target as "macro overhangs and company-specific disruptions in Cloudflare's sales organization will likely persist over the medium term."

Mizuho analysts lowered the price target to $49 from $60 per share as tough macro continues to "exert significant pressure on execution and outlook."

"We continue to believe that NET possesses highly scalable architecture and a culture of strong innovation. However, weak execution and a reset of this magnitude are concerning, and we suspect it will take time before NET's business significantly rebounds," the analysts wrote in a note.

(Additional reporting by Senad Karaahmetovic)

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