Cloudflare: When Running With the Herd Backfires
Consensus is comforting in times like now, when all investors see is red in their portfolios. But is running with the herd a good way to protect yourself, or are you asking to be trampled? The herd that is Wall Street has flocked to some stocks, evidenced by their stubborn elevations that remain higher than most.
Take cloud services provider Cloudflare (NYSE: NET); yes, the stock has taken its hits on the chin, falling 72% from its peak. But look around the technology sector, and you'll quickly see the premium from which it still trades. Here is why the generally positive sentiment toward the stock creates risk for shareholders.
Don't interpret this as a bearish take on Cloudflare's business; my only goal is to help you succeed as an investor. The company offers various internet services through the cloud and seems poised for long-term success. But stock prices move like a popularity contest in the short term and based on fundamentals over the long term. That's why stocks can get expensive and nobody bats an eye, but when they plummet to bargain levels, people run for the exits.
Source Fool.com
