Cloudflare stock's recovery will continue as the SaaS firm benefits from secular trends

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Cloudflare ($NET), one of the best-performing SaaS stocks in recent years, has disappointed investors lately. The stock tumbled over 15% in early May following the Q1 earnings release, even though the company beat estimates and its guidance was in line with analyst forecasts. NET’s guidance wasn't impressive enough, and Wall Street punished the stock. For high-flying SaaS stocks like Cloudflare, in-line results are often considered a “miss.”

However, sharp post-earnings selloffs not supported by underlying fundamentals often present good buying opportunities, and this was the case with NET. As you can see below, the stock has recouped its post-earnings losses as investors bought the dip.

This recovery is likely to continue given that Cloudflare operates in high-growth verticals and has a leading market position. It benefits from secular trends such as vendor consolidation, security spending, and, of course, AI, all of which can support the company’s rapid growth for the foreseeable future. Let’s take a deeper dive.

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