Tuesday's IBD 50 Stocks To Watch pick, artificial intelligence leader Cloudflare, is offering a new buy point. That makes Cloudflare one of the best AI stocks to watch right now. Shares tumbled nearly 4% midday Tuesday, amid overall weakness in the stock market.
Cloudflare works to speed up and provide security for web applications routed through its intelligent global network. The company has added web infrastructure to handle fast emerging generative artificial intelligence apps.
"We believe the company has moved past prior execution issues and is gaining traction more quickly than anticipated in the zero trust and SASE cybersecurity markets," William Blair analyst Jonathan Ho said in a note to clients. "We believe significant trends in cybersecurity, AI, and edge (computing) could be meaningful drivers for future growth as Cloudflare has positioned itself as a key enabler."
Secure Access Service Edge, or SASE, offers a fast and cost-effective way of securing an organization's branch offices and remote workers.
In late September, Cloudflare announced its "Workers AI" platform. It allows users to run machine learning models, on the Cloudflare network, from your own code.
On Feb. 8, Cloudflare earned 15 cents per share, up 150% from 6 cents a year earlier. Revenue climbed 32% to $362.5 million. Shares soared more than 19% in response, hitting new highs.
"We had an exceptionally strong fourth quarter," Chief Executive Matthew Prince said in a news release. "We grew revenue by 32% year-over-year to $362.5 million, blew away our previous records for new ACV (annual contract value) — delivering the highest quarterly growth since 2021 — and signed both our largest new customer win and largest customer renewal ever."
AI Stock Eyes Buy Trigger
Following big gains since early November, the AI stock is approaching a 102.30 buy point in a three-weeks-tight pattern, according to IBD MarketSurge chart analysis. Clearing that buy point in heavy volume can offer investors a chance to pick up shares.
A three-weeks-tight is a constructive trading pattern that signals demand from Big Money. Despite the big gains in recent weeks, institutions are unwilling to part with their shares.
Amid the big price gains, the AI stock boasts a strong 96 out of a perfect 99 IBD Composite Rating, according to IBD Stock Checkup. That makes Cloudflare one of the best AI stocks to watch.
On another bullish note, the stock's relative strength line soared to new highs in February. That's a sign of strong stock market outperformance. Remember, the RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on IBD Charts.
Best Stocks To Buy And Watch
Three recent IBD 50 Growth Stocks To Watch picks are among the best stocks to buy and watch.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Celsius | 68.94 | Consolidation | |
| Netflix | 579.64 | Tight area | |
| Intra-Cellular Therapies | 74.17 | Cup base |
Source: IBD Data As Of Feb. 28, 2024
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
