1Mon·

2nd trade: Cloudflare

A first position opened here as well

27.06

Cloudflare

Bought x33 at $192.78

$6,361.74

8 Comments

userc811746a6d9041b6@userc811746a6d9041b6

1Mon

What is your case? I find them ungodly overrated

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Der Spekulant@Derspekulant1

1Mon

@userc811746a6d9041b6 On the basis of what would you say that the share is overvalued?

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userc811746a6d9041b6@userc811746a6d9041b6

1Mon

@Derspekulant1 P/E ratio negative/ P/B ratio 42/ P/E ratio 32 (!) KCV 278 and should remain in the triple digits for the next few years. For me, the valuation would be justified if they were growing at over 100% per year. But 2 billion sales at a valuation of 67 billion is absolutely sick for me and I can't afford to get carried away, no matter how good the company is

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Der Spekulant@Derspekulant1

1Mon

@userc811746a6d9041b6

I understand your point, but I think there is too much argumentation here with classic valuation ratios such as P/E or P/E ratio, which don't really help with SaaS companies like Cloudflare.

Cloudflare is not an industrial company with machinery, but a scalable software and infrastructure company with recurring revenues, high margins and strong growth. And this is precisely what partly justifies the high valuation.

A P/E ratio of 32 seems high - no question. But in isolation this says little. For SaaS companies with 70-75% gross margins, recurring revenues, exponential growth potential and a global footprint, a premium over traditional companies is completely normal. Comparable companies such as Zscaler, CrowdStrike or Datadog were (and are) valued similarly.

More importantly, Cloudflare clearly fulfills the Rule of 40 - i.e. growth plus efficiency is a given. The Magic Number is also strong, which means that the company acquires customers efficiently and scales sustainably. If they were to cut back on marketing, they would already be profitable today - but they consciously continue to invest in order to secure market share.

The negative P/E ratio is simply uninteresting in this context. Anyone looking at short-term profits here is missing out on how this business model will develop over the next few years. With SaaS, profits are typically delayed, but with enormous leverage.

What is often underestimated: Cloudflare is not just building a CDN, but a global platform for security, network and compute. Anyone who understands the long-term target picture sees an infrastructure company with a platform character - not just an expensive CDN provider.

Conclusion: Of course, the share is ambitiously valued. But you won't get very far with this model using traditional yardsticks. Companies with exponential potential always look overvalued at first glance - until they are not.
Unfortunately, you are working with the wrong key figures here.

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userc811746a6d9041b6@userc811746a6d9041b6

1Mon

@Derspekulant1 That's right, I wish you every success too. My approach saved me a lot of losses in 2022. Good luck! 😊

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Der Spekulant@Derspekulant1

1Mon

@userc811746a6d9041b6 This also applies to normal non-tech or SaaS companies, you're definitely right and I wouldn't invest there either. cloudflare was also highly valued in 2023 and has doubled since then. Thank you as well!

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EugeneKrabs@Danicx13

1Mon

I wouldn't have bought now either. The customs crash was a good place to buy. I did too. I thought they would recover quickly. And I was right. You don't have to sell, I would hold.

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Der Spekulant@Derspekulant1

1Mon

Mega company, but currently at ATH, but with more AI activity on the web, cloudflare is becoming more and more needed. Use it myself on one of my websites and am mega happy with the entry level product. I invested for the first time in 2023, magic Number and Rule of 40 are very good and recently bonds were issued again to invest which speaks very well for future growth. Please for the people in the comment column: no P/E, P/B or P/B ratio is used here as SaaS. Make a post soon about $NET

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