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On Monday, Citi analyst Tyler Radke revised the price target for Confluent Inc (NASDAQ:CFLT), lowering it to $25.00 from the previous $37.00, while keeping a Neutral rating on the stock. Currently trading at $20.65, the stock has declined over 25% in the past six months. The adjustment follows Confluent’s first-quarter results for 2025, which included a disappointing cloud revenue performance and a reduction in the full-year 2025 guidance. According to InvestingPro data, the company maintains strong revenue growth of 24% year-over-year.
Confluent management pointed out a slower than expected uptick in large customer engagements and an increased emphasis on cost optimization. Despite these challenges, InvestingPro data shows the company maintains strong financial health with a current ratio of 4.42 and more cash than debt on its balance sheet. Radke’s analysis observed that compared to other companies that have maintained their guidance, Confluent appears to be more affected by macroeconomic factors and volatility in large customer ramp-ups. This situation may be exacerbated by Confluent’s customer base potentially exploring open-source alternatives, as indicated by recent partner checks.
In response to these factors, Citi has revised its estimates for Confluent towards the lower end of the company’s guidance for the fiscal year 2025. Additionally, the long-term cloud revenue trajectory has been adjusted, with the compound annual growth rate (CAGR) now set at 23%, down from the previous forecast of 26%.
Despite recognizing the long-term opportunities as Confluent’s data streaming platform (DSP) continues to mature, Radke remains cautious due to the current uncertainties, including a transition in sales leadership. The new price target of $25 is based on approximately 6 times the company’s expected 2026 enterprise value to sales.
In other recent news, Confluent Inc reported a 26% year-over-year increase in subscription revenue for the first quarter of fiscal year 2025, surpassing both company guidance and consensus estimates. Despite this strong performance, the company has provided conservative guidance for the second quarter and fiscal year 2025, reflecting current market uncertainties. Analysts from various firms have adjusted their price targets for Confluent, with Canaccord Genuity setting it at $32, Needham at $26, Bernstein at $32, Evercore ISI at $28, and Goldman Sachs at $24. While Canaccord, Needham, and Bernstein maintain a Buy or Outperform rating, Goldman Sachs holds a Neutral rating, citing economic uncertainties and slower consumption trends. Confluent’s management noted the influence of large enterprises normalizing expenses and a slower rollout of new projects on the company’s performance. Despite the cautious outlook, analysts like Evercore ISI remain optimistic about Confluent’s growth prospects, particularly in real-time data streaming driven by GenAI workloads. Confluent’s management has expressed confidence in navigating potential challenges with strategic planning and maintaining robust operating margins.
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