Cloudflare (NET) Stock: Mastercard Partnership and Market Selloff Unpacked

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TLDR

  • Cloudflare and Mastercard declared a cybersecurity partnership on February 17, aimed at small businesses, government entities, and critical infrastructure.
  • The agreement merges Mastercard’s Recorded Future threat intelligence and RiskRecon attack surface monitoring with Cloudflare’s Application Security portfolio.
  • NET stock experienced a market sell-off after Anthropic introduced Claude Code Security, although Barclays stated it isn’t a direct rival.
  • Cloudflare’s revenue increased by 27.7% over three years, yet the company still has a negative operating margin of -9.28%.
  • Insiders selling 472,372 shares in the past three months has caused some investor concern.

Cloudflare (NET) made news this week with two distinct developments — a significant partnership announcement and an unforeseen market sell-off.

NET Stock Card

On February 17, Cloudflare confirmed a strategic collaboration with Mastercard. The deal combines Mastercard’s Recorded Future threat intelligence and RiskRecon attack surface monitoring with Cloudflare’s Application Security portfolio.

The objective is clear: assist small businesses, critical infrastructure operators, and government organizations in identifying and resolving cyber vulnerabilities more swiftly.

The combined service will enable organizations to discover internet-exposed assets they might not be aware of, evaluate vulnerabilities, and rapidly deploy security tools such as web application firewalls and encryption.

Users will have access to continuously updated cyber risk assessments and prioritized threat analytics, all available through Cloudflare’s dashboard.

It’s a practical solution for organizations that frequently lack internal resources to manage an expanding digital footprint.

Market Selloff After Anthropic Launch

While the Mastercard news was generally positive, NET stock was caught up in a broader sell-off of security-related stocks following the unveiling of Claude Code Security — a developer-focused tool currently in trial.

Barclays pushed back against that reaction. The bank stated it finds the widespread sell-off in security stocks “perplexing” and does not see Claude Code Security as a direct competitor to Cloudflare’s existing business.

Barclays maintained that the market reaction seems out of proportion to the actual competitive threat posed by the new tool.

DZ Bank had separately upgraded NET earlier in February, becoming more positive on the stock ahead of these developments.

Financials and Valuation

Financials tell a mixed tale. Revenue has grown 27.7% over the past three years, indicating strong demand for its services.

But profitability remains elusive. The company has a negative operating margin of -9.28% and a net margin of -4.72%, meaning it’s still spending more than it earns at the bottom line.

On the balance sheet, Cloudflare has a current ratio of 1.98, suggesting it can cover short-term obligations. However, its debt-to-equity ratio of 2.41 indicates significant leverage.

The Altman Z-Score of 9.16 indicates solid financial health, and a Beneish M-Score of -2.94 suggests low risk of earnings manipulation.

However, valuation is stretched. NET trades at a price-to-sales ratio of 28.5 — well above historical medians — and a price-to-book ratio of 42.71. The stock has a market cap of $62.37 billion.

Analyst consensus is at a moderate buy, with an average target price of $233.63 and a recommendation score of 2.2.

The RSI of 54.91 places the stock in neutral territory — neither overbought nor oversold.

What may be harder to ignore: insiders sold 472,372 shares in the past three months. Such a level of selling by company executives tends to draw attention regardless of the broader context.

Cloudflare’s beta of 2.07 reflects high volatility, which has been evident this week.

The GF Value estimate places NET at $142.25, with the stock currently marked as modestly overvalued.