Cloudflare - Why did it tank 20%?
![Cloudflare - Why did it tank 20%?](https://sgsnsimg.moomoo.com/102263458/editor_image/7333e23867683aeb9f1a21f7e4bd9001.png/bigmoo)
Hypergrowths are having a hard time in high-interest rates conditions.
Even though the results were considered great, share prices have tanked by 20%.
So what are the challenges that Cloudflare faces?
1. Revising guidance down
![Cloudflare - Why did it tank 20%?](https://sgsnsimg.moomoo.com/102263458/editor_image/59babec754353883ac8c3690e55a0bba.png/bigmoo)
Full-year revenue guidance for 2023 is down. It used to be USD 1.33 billion but in their latest Q1'23, the top line estimates got adjusted down to USD 1.28 billion.
![Source: Cloudflare Q1 2023 - Investor Presentation](https://sgsnsimg.moomoo.com/102263458/editor_image/a153794155bb35a78b40d2b0683a1ee1.png/bigmoo)
2. Significant drop in DBNR
![Source: Cloudflare Q1 2023 - Investor Presentation](https://sgsnsimg.moomoo.com/102263458/editor_image/53c0c9d56f8d37de89179c72b808590e.png/bigmoo)
Dollar-based net retention, which measures how much more revenue Cloudflare hikes on the services and offerings that it has, has dropped to 117%. Compared to Q1'22, the figures have experienced a 10 percentage point drop YoY.
Although prices can't always go up forever, this sudden drop below 120% might have spooked investors.
3. Lofty valuations
![Cloudflare - Why did it tank 20%?](https://sgsnsimg.moomoo.com/102263458/editor_image/e833891a4db930e4afe79daedf81fedc.jpg/bigmoo)
Even though Cloudflare has been eking out operating margins, it is not positive from a GAAP perspective.
![Source: Cloudflare 10-Q](https://sgsnsimg.moomoo.com/102263458/editor_image/5e3c50932c83398a83795e0b1eff7662.png/bigmoo)
Growth at all costs is the past. The theme now for hypergrowth is to break into profitability or EBITDA positive.
Trading at a P/S ratio of 11x and still loss-making, might have broke all key supports for Cloudflare.
DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities, or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities, or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities, or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities, or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
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