Why Cloudflare Shares Rose More Than 20% Last Month
What happened
Shares of Cloudflare (NYSE: NET) gained 20.8% in February 2022, according to data from S&P Global Market Intelligence. The inveterate provider of network security and performance services was poised for a sharp rebound after a 27% drop in January. The rebound was triggered by a fantastic fourth-quarter report and reinforced by the growing demand for cybersecurity tools.
So what
January's plunge extended a downtrend that started in November of 2021 when concerns about inflation and the omicron variant of COVID-19 put a lid on high-octane growth stocks.
Cloudflare proved the bears wrong on February 10 as Q4 revenues came in well above the analyst consensus. The company also set up optimistic guidance targets for the next quarter and fiscal year.
Many cybersecurity stocks posted big price jumps when Russia attacked Ukraine on February 24. Cloudflare was no exception, gaining 18.6% that day alone.
Image source: Getty Images.
Now what
After these positive catalysts, the risk-averse market downtrend seized control over Cloudflare's chart again. As of the afternoon of March 7, the stock is down 19% in the first few days of the new month. Zooming out a bit further, we can see Cloudflare's shares have lost 28% in 2022. February's uptick was just a brief breath of fresh air.
This bearish market action doesn't change Cloudflare's business prospects, though. The company is an established leader in the data-security and network-performance sectors -- two markets with solid growth prospects in the long run. Meanwhile, after retreating 58% from November's all-time highs, Cloudflare's stock trades at historically low price-to-sales (P/S) ratios:
NET PS Ratio data by YCharts
Growth investors may want to revisit Cloudflare while the stock is having a fire sale.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns and recommends Cloudflare, Inc. The Motley Fool has a disclosure policy.
