Where’s the high-priced Cloudflare stock headed after grand IPO?

Web security company Cloudflare surprised the market when it went public on Friday, nearly a month after announcing the IPO. The stock gained about 25% after opening at $18. Earlier, the tech firm raised about $525 million in a public offering of 35 million shares, at an upwardly revised price.

The strong opening will be an encouragement for the early-stage tech firms preparing for stock market debut this year, amid hectic IPO activity. The exceptionally high valuations being witnessed in the IPO market, often running into several billion dollars, suggest a change in the trend.

Also read: 9 IPO stocks that have given 100+% returns

The market will be keeping a tab on Cloudflare in the coming days, considering the upbeat debut and positive outlook on the company that has expanded market share rather quickly in recent years. Moreover, the unique services it offers have significant growth potential.

The market value of the company, which is trading on the New York Stock exchange under the ticker symbol NET, moved up to $4.5 billion on the first day. Since the valuation is pretty high for a beginner like Cloudflare, the stock is unlikely to make significant gains in the near term and offer great returns to shareholders.

Related: Amazon Q2 2019 Earnings Conference Call Transcript

In the first half of the year, Cloudflare recorded a net loss of $37 million on sales of $129 million, representing a 48% year-over-year increase. The loss was wider than the $32-million loss reported a year earlier on sales of $87 million. It had around 75,000 paying customers at the end of the first half, which includes tech giants like China-based Baidu.

The San Francisco-based company helps websites protect and distribute their content. It came under fire recently after it supported certain shady websites with political links, including a neo-Nazi portal. In addition to the cloud divisions of Amazon (AMZN) and Microsoft (MSFT), Cloudflare also competes with Cisco (CSCO) and Huawei.

Also see: Microsoft Q4 2019 Earnings Conference Call Transcript

Earlier this week, tech firm SmileDirectClub joined the IPO bandwagon with a rather disappointing debut. Shares of the digital health startup plunged 27% on the first day of trading. It is considered as the worst IPO at any American stock market in more than a decade.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips