- Many investors are asking whether Cloudflare's share price really lines up with its underlying value, or if expectations have simply raced ahead of the fundamentals.
- The stock closed at US$206.34, with returns of 19.8% over the last 30 days, 5.3% year to date and 78.4% over the past year. This puts recent price action firmly on investors' radar.
- Over recent months, Cloudflare has remained in the spotlight as investors react to company updates, product launches and broader conversations about the role of cloud security and edge networking in large scale internet infrastructure. This mix of stock moves and headlines has raised fresh questions about what a reasonable price tag for the business looks like today.
- Despite that attention, Cloudflare currently scores 0 out of 6 on Simply Wall St's valuation checks. The next sections will walk through common valuation methods in detail and then finish with a more complete way to think about what the market is pricing in.
Cloudflare scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Cloudflare Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes forecasts of a company’s future cash flows, then discounts them back to today’s dollars to estimate what the business might be worth now.
For Cloudflare, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is reported at about $311.3 million. Analyst forecasts and Simply Wall St extrapolations point to projected free cash flow of $1.69 billion in 2030, with intermediate yearly projections between 2026 and 2035 used to shape the curve of expected growth.
After discounting these projected cash flows, the model arrives at an estimated intrinsic value of US$98.99 per share. Compared with the recent share price of US$206.34, this implies the stock is 108.4% above the DCF estimate, so the model flags Cloudflare as looking expensive on this basis.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Cloudflare may be overvalued by 108.4%. Discover 58 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Cloudflare Price vs Sales
For companies where earnings are limited or volatile, P/S is often a useful yardstick because it compares the share price to the revenue the business is already generating, without relying on profit figures that can swing around.
What counts as a reasonable P/S multiple usually reflects how quickly investors expect revenue to grow and how risky the business model appears. Higher growth and lower perceived risk tend to support a higher P/S, while slower growth or higher uncertainty tend to point to a lower one.
Cloudflare trades on a P/S of 33.50x, compared with an IT industry average of 1.70x and a peer group average of 11.56x. Simply Wall St’s Fair Ratio framework estimates a P/S of 12.66x for Cloudflare, based on factors such as its growth profile, profit margins, industry, market cap and company specific risks.
This Fair Ratio approach can be more useful than simple peer or industry comparisons because it adjusts the expected multiple for Cloudflare’s own characteristics rather than assuming that one size fits all.
Compared with the 12.66x Fair Ratio, the current 33.50x P/S suggests the stock is trading considerably above what this model would indicate.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Cloudflare Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story to your numbers by linking your view of Cloudflare’s future revenue, earnings and margins to a forecast and fair value. You can then compare that fair value with the current price to help you decide whether the stock looks attractive or stretched. Each Narrative lives on the Community page, updates as fresh news or earnings arrive, and can reflect very different perspectives, such as a bullish Cloudflare story that leans toward a fair value near US$318.00 and a more cautious one closer to about US$145.00.
For Cloudflare, here are previews of two leading Cloudflare narratives to make comparison easier:
Fair value in this bullish narrative: US$232.43 per share.
At the recent price of US$206.34, this narrative implies Cloudflare is about 11.2% below its fair value estimate.
Revenue growth assumption: 28.18% a year.
- Focuses on demand for cloud native security, AI related workloads and zero trust architectures supporting revenue and customer retention over time.
- Assumes margin improvement, with analysts modelling revenue of about US$4.6b and earnings of US$44.2m by 2029, combined with a very high future P/E multiple to justify the fair value.
- Flags risks around customer concentration, regulation, competition and uncertainties around monetising newer initiatives such as Act 4 and AI related products.
Fair value in this bearish narrative: US$145.00 per share.
At the recent price of US$206.34, this narrative implies Cloudflare is about 42.3% above its fair value estimate.
Revenue growth assumption: 26.24% a year.
- Emphasises regulatory, geopolitical and sustainability related pressures that could lift costs, limit market reach and weigh on margins over time.
- Assumes revenue of about US$3.7b and earnings of US$255.9m by 2028, with a high future P/E multiple of about 209x still required to support the bearish fair value.
- Highlights risks from competition, open source tools and potential commoditisation of core services, while acknowledging that faster product adoption or AI related monetisation could challenge this view.
Do you think there's more to the story for Cloudflare? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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