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Why Cloudflare Stock Is Jumping Today
The stock of Cloudflare (NYSE: NET) is making gains in Thursday trading. The software specialist's share price was up 4.5% as of 10:15 a.m. ET today. Meanwhile, the S&P 500 index and the Nasdaq Composite index were both down 0.8%.
Cloudflare and other cybersecurity stocks are gaining ground in conjunction with recent news about hacking attacks originating from China. In addition to its content-delivery-network (CDN) services, Cloudflare is also a leading provider of distributed-denial-of-service (DDoS) mitigation and other cybersecurity tools.
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Cloudflare climbs on rising cyberthreats
On Dec. 30, the U.S. Treasury Department announced that it had been breached by Chinese hackers. The department described the attack as a "major incident" and indicated that hackers had been able to gain access to computers used by Treasury employees.
China's government denied any connection to the attack, but it highlighted rising tensions between the Asian power and the U.S. -- and the increasingly important role that cybersecurity is playing in the unfolding rivalry between the two countries. As a result, Cloudflare and other players in the cybersecurity space are seeing an uptick in bullish momentum.
What comes next for Cloudflare
Cloudflare is one of the world's top providers of internet infrastructure and cybersecurity services. A huge share of global internet traffic depends on the company's portals and passes through them, and the business looks poised to benefit from rising security demands and the ongoing growth of the overall internet.
With sales increasing 28% year over year to $430.1 million in last year's third quarter, it's also already posting encouraging growth.
On the other hand, the company has a highly growth-dependent valuation and is trading at about 18.5 times this year's expected sales. Cloudflare looks poised to benefit from long-term trends across multiple key verticals, but investors should keep in mind that the company's valuation opens the door for volatility in the near term.
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Keith Noonan has positions in Cloudflare. The Motley Fool has positions in and recommends Cloudflare. The Motley Fool has a disclosure policy.
