Cloudflare (NYSE: NET) is one stock that has seen an abundance of volatility lately. Despite being up over 86% year-to-date (YTD), the company has seen a downturn of over 16% in the last five days alone.
With the tide seemingly turning against the cloud computing stock, we analyze whether or not investors should be worried about this dip and the wider volatility engulfing the company.
Why is the stock dipping?
As far as the company goes, very little has changed regarding its actual value proposition to investors. There’s been no major news, no scandals – nothing that would indicate the need for shareholders to sell off en masse.
What has changed, however, is the world around us. Investors in the tech industry have panicking due to high levels of inflation and fears of rising rates. High rates typically affect high-value tech companies in particular as they eat away at their future cash flow projection, a metric commonly used in evaluating stocks with strong growth potential.
Cloudflare, as a relatively expensive stock, is one that was always likely to suffer as tech stocks experienced a widespread pullback.
So is Cloudflare still a good investment?
Cloudflare remains a good proposition in an industry that is still ripe for future growth. Despite strong competition from cloud computing giants such as Amazon, Microsoft, and Google; Cloudflare has done an excellent job at positioning itself as the next biggest player.
Yes, the stock is currently still priced quite highly, and there’s no guarantee that it won’t fall further in the coming weeks and months. Remember though, we’re big proponents of long-term investing at MyWallSt. We encourage people to buy into companies they believe will still be strong in 10 years’ time.
So far, Cloudflare has given us no reason to believe it won’t continue to grow and develop as a company. There will of course be many ups and downs as the market undergoes periods of volatility, but ultimately we should see the firm make good on its amazing potential.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.