Cloudflare’s 2Q revenues jumped 48% to $99.7 million year-over-year and beat analysts’ expectations of $94.1 million thanks to strong growth in its paying customer base. The cloud networking and security solution provider’s paying user base increased 24% mainly driven by elevated demand for cloud-based solutions amid the coronavirus-led work-from-home wave.Cloudflare (NET) posted a 2Q loss of $0.03 per share which was also narrower than the Street estimates of $0.06 and lower than the year-ago quarter’s loss of $0.22.The company’s co-founder and CEO, Matthew Prince said, "We delivered a strong second quarter, with revenue growth up 48% year-over-year, and added a record number of both large and paying customers." He further added, "It has been incredible to see the rate of innovation that has continued, and even accelerated, as we work remotely.Ahead of its earnings, on August 4, RBC Capital analyst Matthew Hedberg raised the price target on the stock to $48 (16.1% upside potential) from $29 and maintained a Buy rating. Hedberg had anticipated a strong 2Q result and stated that “the company is well positioned post-COVID given its cloud-based platform that benefits from greater use of internet and remote work.”Overall, NET has a Strong Buy analyst consensus. The average price target of $43.67 implies an upside potential of 5.6%. (See NET stock analysis on TipRanks)Related News: Etsy Crushes 2Q Revenue Expectations; Roth Raises Stock To Buy Roku Tops 2Q Estimates But Cautions About Ad Outlook Zynga Rises On Record 2Q Revenues Fueled By Digital Gaming Demand More recent articles from Smarter Analyst: * Zillow Surges 13% On Better-Than-Feared Earnings; Analyst Urges Caution * Booking Holdings Sees Gross Bookings Plunge 91%; Analyst Still Says Buy * Stifel Lifts EPAM Systems’ PT After Strong 2Q Results * Fortinet Slips 7% After-Hours As 2Q Billings Missed Estimates

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Top news and what to watch in the markets on Friday, August 7, 2020.

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(Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. is finally showing a bit more of an appetite.Buffett’s conglomerate began putting more of its $137 billion cash pile to work after a period of relative silence during the start of the pandemic, striking a deal for natural-gas assets in July and even snapping up at least $2 billion of Bank of America Corp. stock in recent weeks through Aug. 4.Now, investors will learn Saturday whether that appetite extended to the conglomerate’s own stock, as some analysts say buybacks may have risen to a record. Berkshire is expected to report second-quarter earnings that day, results that could show that gains in the stock portfolio drove net income to the highest ever for a company in the S&P 500.The recent transactions are “a nice start,” said Jim Shanahan, an analyst at Edward Jones, adding that he hoped the Bank of America stock purchases indicated there was more investment activity by Berkshire. Still, “it’s not a tremendous amount of capital given the size of the balance sheet, size of the investment portfolio and market cap of the company.”Buffett, known for swooping in as a lender of last resort in the 2008 financial crisis, remained relatively cautious during the early days of the pandemic. The 89-year-old chief executive officer offloaded airline shares in April and failed to find deals similar to his 2008 Goldman Sachs Group Inc. and General Electric Co. preferred-stock bets — in part because of the swift action by the Federal Reserve.That’s left investors wondering whether Buffett’s cautious commentary at his annual meeting in May meant the billionaire investor would stay on the sidelines. Buffett said even Berkshire’s record cash pile at the end of March wasn’t huge when compared with the worst-case scenario for the pandemic and economic shutdown. And he said stock buybacks weren’t more compelling even after Berkshire shares fell 20% in the first quarter.A regulatory filing that detailed Buffett’s annual gifts to charities gave investors a hint that he may have found the shares more attractive in the months following his annual meeting. UBS Group AG analysts say it indicates that Berkshire bought back $5.3 billion of its stock from April 23 to July 7. A total near that level would surpass Berkshire’s record quarterly repurchases since loosening its buyback policy in 2018.“One of the biggest frustrations with Berkshire has been its minimal share buyback despite its shares trading at a significant discount to intrinsic value and its massive cash position,” UBS analyst Brian Meredith said July 28 in a note to clients. “BRK’s shares continue to look inexpensive, and we would look favorably on a continuation of large-scale share buybacks.”What Bloomberg Intelligence Says“Berkshire’s opposition to deploying capital may be thawing somewhat, and we believe share repurchases are a logical option.”\–Matthew Palazola, senior industry analyst, and Derek Han, associate analystBerkshire had to disclose its purchases of Bank of America shares already because it now holds more than a 10% stake in the lender. Saturday’s regulatory filing should give a better indication of how active Berkshire was in the broader stock market during the quarter.“The first quarter, rightly so, there was certainly a lot of uncertainty,” said Cathy Seifert, an analyst at CFRA Research. “But I also think there is going to be a continued degree of prudence as they see how some of the insurance claims play out.”Here’s other topics that could come up in the earnings report:Record IncomeNet income is expected to reach a record $37.7 billion, according to estimates from UBS’s analysts. The stock market came roaring back in the second quarter with a nearly 20% gain by the S&P 500. That should help boost Berkshire’s net income, which includes swings in its massive portfolio of stocks.Apple Inc., Berkshire’s largest common stock holding, gained more than 43% in the second quarter and has continued to surge, bringing its year-to-date increase to roughly 55% through Thursday’s close. Berkshire’s stake would have been worth $89 billion through the end of the second quarter unless it bought or sold shares. That means the Apple holding was equal to 18% of Berkshire’s market capitalization.Berkshire’s BusinessesBerkshire’s operations, ranging from its railroad BNSF to its footwear and apparel makers, are likely to continue to feel the pain of the pandemic. The conglomerate said that most businesses were hurt in March and April, with the impact ranging from “relatively minor to severe.”Some units, such as auto insurer Geico, could actually benefit as rivals including Allstate Corp. report fewer vehicle accidents. Still, some of Berkshire’s other insurance operations face the risk of Covid-19 losses, according to Keefe, Bruyette & Woods analyst Meyer Shields. The railroad probably saw declining volumes, according to UBS.“Because of their mix of businesses, they really are a microcosm for the broader economy,” CFRA’s Seifert said. “Over the weekend and over the last week or so, we’ve seen a rash of retail bankruptcies. It’ll be interesting to see if any of the smaller, retail- and consumer-oriented names within Berkshire go that route.”Charlie Munger, a Berkshire vice chairman and Buffett’s longtime business partner, warned in April of that possibility, saying that a few of Berkshire’s small businesses might not reopen once this situation is over.“An update on what that does and doesn’t include would also be very helpful,” KBW’s Shields said.Potential HitsBerkshire cautioned in its last earnings report that it had weighed taking an impairment for goodwill because of Covid-19 disruptions, but decided it wasn’t necessary. The company warned that the pandemic’s effects could be worse than estimated and require it to book impairment charges before its annual review in the fourth quarter.Kraft Heinz Co., the packaged-food giant that counts Berkshire as its largest shareholder, posted non-cash impairment charges in the second quarter. Berkshire’s carrying value for its Kraft Heinz stake exceeded the market value by $5.5 billion at the end of March. Buffett’s company has avoided an impairment so far, citing the length of time that the fair value has been less than carrying and a desire to hold the investment until it recovers.“For the sake of balance-sheet integrity, the value of Kraft Heinz on Berkshire’s balance sheet should not be what it currently is,” CFRA’s Seifert said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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iQ Capital Managing Partner and CEO Keith Bliss joins Yahoo Finance’s Kristin Myers to discuss the stocks he is watching as many Americans are working from home amid the coronavirus.

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(Bloomberg Opinion) — The U.S. threat to delist Chinese companies just got a lot more real. Yet businesses from Asia’s biggest economy continue to line up to sell shares on American exchanges — and are thriving. What’s going on?The President’s Working Group on Financial Markets has told U.S. exchanges to set rules that would require companies to grant American regulators access to their audit work papers, something that China has refused to allow. Firms already listed will have until Jan. 1, 2022, to comply, with removal from U.S. exchanges the ultimate penalty. Those seeking to sell shares will need to adhere to the new rules, according to the high-powered group of U.S. regulators, which includes Treasury Secretary Steven Mnuchin.You might think this ratcheting up of pressure, which reflects increasing geopolitical tensions and the fallout from accounting scandals at Chinese companies such as Luckin Coffee Inc., would put a damper on the rush of enterprises looking to go public. Anything but. Almost every day, it seems, another Chinese company announces plans to list in the U.S. — and they’re finding no shortage of takers. Late last month, Beijing-based electric-car maker Li Auto Inc. raised $1.1 billion selling shares in an initial public offering that priced above the marketed range. It was the biggest IPO by a Chinese company in New York since Shanghai-based rival NIO Inc. sold $1.15 billion of stock in September 2018. Xpeng Motors, based in Guangzhou, is poised to follow this month.Shares of U.S.-listed Chinese companies are also outperforming the broader market. The Nasdaq Golden Dragon China Index has surged 30% this year, compared with a 3.7% gain for the S&P 500.The phenomenon may be partly the product of a craze in day-trading fueled by pandemic lockdowns, which have left many Americans stuck at home looking for amusement. If the Robinhood crowd can drive shares of bankrupt companies to illogical heights, then why not Chinese stocks, too?On a more rational level, some investors may be betting that threats to delist Chinese companies are largely noise, and a compromise will eventually be worked out. Chinese listings are a gravy train for the New York Stock Exchange and Nasdaq, and both sides have a financial interest in ensuring that it doesn't get derailed.On this point, it’s worth noting that the U.S. regulators left some wiggle room. Chinese companies can hire a “co-auditor,” effectively having a second inspection performed by a U.S. accounting firm after a Chinese affiliate does the first. That would be a potential workaround for Beijing’s rules that prevent the Public Company Accounting Oversight Board from reviewing audits of U.S.-listed Chinese companies.To count on peace breaking out may be rash, though. There’s plenty of evidence that the move toward a U.S.-China decoupling is serious and tangible. Just look at the lengthening list of U.S.-traded Chinese companies that are selling shares in Hong Kong, giving them a secondary outlet into international capital markets in the event that they are forced to leave: Alibaba Group Holding Ltd., JD.com Inc. and NetEase Inc. among them.Or witness Tencent Holdings Ltd., which lost $30 billion of market value in Hong Kong on Friday after the Trump administration moved to ban U.S. residents from doing business via its WeChat app. It will be a brave investor who bets on this trend reversing itself.  This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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Switzerland has signed an agreement with Moderna to secure early access to the COVID-19 vaccine the U.S. biotech company is developing, the government said on Friday. Switzerland will get 4.5 million doses of the vaccine, enough to vaccinate 2.25 million people if as expected two doses are needed per patient. The government is also talking to other vaccine companies and has allocated 300 million Swiss francs ($329 million) to the project.

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(Bloomberg Opinion) — Over the past decade, it’s almost been too easy for Americans to manage their wealth. A textbook 60/40 portfolio — in its simplest incarnation, exposure to the S&P 500 Index and Treasury bonds — was an effortless winner. The U.S. boasted the world’s best stock market, and bonds, apart from offering interest income, provided a nice hedge against equity risks.Now we live in extraordinary times that demand a reshuffle. Swapping out some bonds for gold and some U.S. technology stocks for Chinese ones could offer a better hedge: Both can be considered credit default swaps against President Donald Trump’s chaotic policymaking. You could argue that the wreckage left by Covid-19, combined with what’s quickly shaping up to be a cold war between the world’s two largest economies, is the closest we’ve come to World War III. And just like wartime episodes of the past, we’re seeing disrupted global supply chains, border lockdowns and restricted movements in labor. War is inflationary. The cheap car parts made in China’s inland city of Wuhan can no longer land in the U.S., and your French wine could cost more as transportation logistics get trickier. Moreover, the Federal Reserve has been flooding its financial system with cash. In just three months, assets held by the central bank ballooned by two-thirds, to almost $7 trillion. To make matters worse, the Fed is mulling a more relaxed stance toward inflation, ready to abandon preemptive rate hikes — even though  consumer expectations have been  ticking up since May. As I’ve argued in a recent piece for Bloomberg Businessweek, bonds are no longer effective equity hedges in an ultra-low-rate world that faces inflationary pressure; gold can do a better job. But after a neck-breaking rally, it’s natural to ask if we’re already too late to the game. History can be our guide. After the collapse of Lehman Brothers in 2008, gold broke out and continued marching higher until September 2011, even as Tea Party belt-tighteners took control of the national narrative in the 2010 midterm election. A decade on, the Republican Party’s libertarian wing has all but disappeared, and is replaced by a cross-the-aisle nod to modern monetary theorists, who brush aside fiscal austerity. The Tea Party is no longer here to sour the gold rally. Meanwhile, since we’re at war, might it be smart to hedge against the possibility of losing? This cold war isn’t over a plot of land or sea, but domination over next-generation technology. The U.S. has the absolute advantage now, with chip and robotic designs far ahead of China’s, but that edge is slipping away. While Washington is wrangling over trillions of dollars of stimulus to fend off a recession caused by waves of coronavirus outbreaks, China, which has the pandemic relatively under control, is only strengthening its tech resolve. For Beijing, it’s killing two birds with one stone. The $1.4 trillion hard tech invesment is the nation’s new fiscal stimulus package. Instead of building more roads to nowhere, China is installing 5G base stations.It’s high time to consider diversifying from U.S. stocks, anyhow. There have been nagging worries about the market being on a tear even with the economy in the dumps. Meanwhile, Big Tech has become too dominant, with the top five mega-cap names now accounting for more than 20% of the S&P 500 and its entire gain this year. This might help explain why mainland firms that recently went public in New York are outperforming their U.S. counterparts, despite the Trump administration’s attempt to delist China Inc. Now, I am not advocating that investors plow their money into China’s big tech companies, because they face the exact same problems that U.S. Big Tech has — overbought stocks and impossible expectations. This year’s passive flows only worsened the concentration risk of benchmark indexes. Alibaba Group Holding Ltd. and Tencent Holdings Ltd. account for a third of the MSCI China Index and about 14% of the MSCI Emerging Markets Index.  Rather, investors should do their homework on smaller hard-tech companies. The truth is, once you identify a promising tech seedling, it doesn’t take a venture capitalist’s patience to watch it blossom. India’s Reliance Industries Ltd. joined the Century Club — stocks with over $100 billion market cap — in just three months. Tencent is another example of a melt-up. Good wealth management is all about diversification. If you’re unsure of Trump’s wartime strategies, add some of gold and China exposure to your portfolio. (Adds details on concentration risk of China’s big tech companies in the 11th paragraph.)This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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