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On Thursday, TD Cowen analysts showed continued confidence in Confluent Inc (NASDAQ:CFLT), raising the company’s price target from $31.00 to $37.00 while maintaining a Buy rating. The adjustment comes ahead of Confluent’s fourth-quarter earnings report, which is scheduled to be released on February 11. According to InvestingPro data, 10 analysts have recently revised their earnings estimates upward, with price targets ranging from $25 to $40.
The bullish sentiment was bolstered by a partner call, which indicated a strong performance in the fourth quarter and an optimistic outlook for 2025. The partner highlighted the emergence of new growth levers from Confluent’s GenAI initiatives and noted a significant improvement in the go-to-market (GTM) strategies for Flink, the company’s stream processing technology. The company’s strong financial position is evident in its impressive current ratio of 4.24 and robust gross profit margin of 73.16%.
TD Cowen anticipates a robust fourth-quarter beat with subscription growth exceeding 3% and a 21% increase in total revenue growth, aligning with expectations for the full year of 2025. The analysts expect the company to provide guidance in line with these figures, with potential to revise them upwards as the year progresses.
Looking into the fiscal year 2025, TD Cowen identifies multiple factors that could drive Confluent’s growth. These include a rise in production use-cases for GenAI applications leading to higher consumption, increased cross-selling opportunities for Flink and the company’s Data Stream Processor (DSP), and new Bring Your Own Cloud (BYOC) initiatives aimed at enhancing the conversion of open-source software users to paying customers.
The firm’s valuation of Confluent’s shares is deemed highly attractive, citing an enterprise value to calendar year 2026 estimated revenue ratio of less than 7 times, against a backdrop of a company expected to sustain a 20-25% growth rate. This perceived undervaluation, especially considering the potential AI catalysts, played a key role in the decision to raise the price target. InvestingPro analysis suggests the stock is slightly overvalued at current levels, with the company maintaining strong revenue growth of 25.01% over the last twelve months. Discover more insights and 8 additional ProTips for Confluent in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Confluent Inc. has been the subject of several analyst reports. JMP Securities maintained a bullish stance on Confluent, reaffirming a Market Outperform rating with a $40.00 price target. The firm cited the company’s significant market opportunity, strong leadership, and path to profitability as key factors. On the other hand, Morgan Stanley (NYSE:MS) downgraded the stock from Overweight to Equalweight and lowered the price target to $30.00, citing near-term risks despite the potential of data streaming and processing.
Piper Sandler analysts increased their price target to $35.00 while maintaining an Overweight rating, reflecting optimism about the company’s future financial performance. Baird, a financial services company, also raised its price target for Confluent to $32.00, albeit maintaining a Neutral rating, reflecting a balance of strong growth prospects and current profitability challenges.
In other company news, Confluent’s Chief Technology Officer, Chad Verbowski, has announced his retirement, effective November 26, 2024, but will continue to serve as an advisor until February 21, 2025. These are recent developments that investors in Confluent should take note of.
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