Is Cloudfare stock a buy?

Hello and welcome to this Xillion master class. Today we will cover Cloudflare, which is known for its ticker symbol NET. The Xillion master class is held twice a week, on Tuesday and Thursday. We typically take an economic concept or a finance topic, or we look at a high-growth smaller company that may not be well-known but has high growth potential over the next 5 to 10 years. Don't forget to tune in every Tuesday and Thursday at 3:00 p.m. Pacific time and 6:00 p.m. Eastern time. If you miss any of these master classes, you can always go to our YouTube channel. Search for Xillion and you can find us easily on YouTube or Google, or visit our website at xillionapp.com. All previous episodes of the Xillion master class are available there.

Real quick, what is Xillion? We are a financial platform that helps you achieve financial independence in 10 years or less. That's our promise to you. When you come to Xillion, we help you optimize your 401K, investments, real estate, and all other financial decisions to reduce financial stress and become financially independent within 10 years. With Xillion, you can see a path to financial independence within the first month of joining us. We offer all this for a very low fee of only $20 a month. We also offer financial advice through competent human financial advisers for only $79 a month.

Check us out at xillionapp.com. I am Gagan Sandhu, the co-founder and CEO of Xillion. I've been investing in the public markets for around 20 years. I became financially independent in my early 40s and now I help others achieve financial independence by building the Xillion platform. As a way of qualification, I have an engineering degree and a master's degree in engineering. I also went to business school at the University of Chicago to hone my skills in finance and other areas.

Through my critical eye, let's jump in and look at Cloudflare. Let me share my screen. Here we go. This is our Xillion website. Please do check us out. You will see a lot of products on how to optimize your 401K, real estate, our proprietary money score, tools to help you plan your retirement and financial independence, explore investments, reduce debt, manage expenses—you name it. Everything you need in your financial life, we have tools for that. One of those tools is called Analyze. If you go to Analyze and search for Cloudflare, here it is. Boom, you are at this page. We will go into quite a bit of depth with Cloudflare.

First, let's talk about what Cloudflare is and what it does, then we'll go into the specifics about whether it's a good stock to own for the next five or maybe 10 years. Cloudflare started in 2009 by Matthew Prince, Michelle Zatlyn, and Lee Holloway. They initially worked on email spam fighting technologies and built a company called Unspam Technologies. They developed a technology called Honeypot to track and reduce email spam. Cloudflare started with concepts to reduce DOS attacks, offer content delivery, and provide edge computing, web application firewalls, and more. Today, they push about 20% of internet traffic.

Their founding team gets five out of five stars. The founders are still with the company, which is a great sign. Matthew Prince is the CEO, Michelle Zatlyn is the COO and President, and Lee Holloway is still one of the lead engineers. This shows their dedication and passion for the company.

Product diversity is strong, with Cloudflare continuously launching new products. Their pricing is straightforward and simple, allowing small startups to get started for free and scale as they grow. This freemium model is very effective in software.

Now let's look at how the stock has performed. Over the last three months, the stock has taken a beating since the last earnings call. Over six months, it has trended down. Over one year, there's been little change. Over three years, you can see the COVID bump and slump, followed by slow recovery. If you liked Cloudflare three to four years ago and still like the business, you can buy it today at similar prices. Since its IPO, Cloudflare has done well, with a market cap of $24 billion.

Valuation-wise, the price-to-sales ratio is 17, higher than 97% of its competitors, indicating it is not a cheap stock to own. However, Cloudflare is a high-growth company, with an annual growth rate of 30%, higher than 85% of its peers. Profitability is typical for high-growth companies, with high gross margins but reinvestment in growth.

Annual and quarterly revenue growth has been consistent and healthy, with Cloudflare showing no seasonality and stable growth rates around 30%. This is a very healthy growth rate, especially given the current market conditions.

Based on all this information, Cloudflare's leadership, product diversity, and pricing make it a compelling stock to consider. I do not currently own any Cloudflare stocks, but I am seriously thinking about buying. I believe this company, with its strong leadership and consistent product innovation, has the potential to do very well in the long run.

Thank you for joining this master class. If you have any questions, feel free to reach out to me on Twitter, LinkedIn, Instagram, or our website. I look forward to hearing your thoughts. Don't forget to join us every Tuesday and Thursday at 3:00 p.m. Pacific Time and 6:00 p.m. Eastern Time for the Xillion master class. Thank you so much!