Evercore ISI cuts Confluent stock target to $28, keeps Outperform

On Thursday, Evercore ISI analyst Chirag Ved adjusted the price target for Confluent Inc (NASDAQ:CFLT) to $28 from the previous $29 while maintaining an Outperform rating on the stock. The revision followed Confluent’s first quarter earnings report, which exceeded expectations with Subscription revenue reaching $260.9 million, a 26% year-over-year increase. This figure surpassed both the company’s guidance of $253-254 million and the consensus estimates of $252.8 million. According to InvestingPro data, Confluent maintains strong financial health with a current ratio of 3.99x, indicating robust liquidity to meet short-term obligations.

Confluent Platform contributed significantly to the strong performance, generating $118.2 million in revenue, an 18% increase from the previous year, and outpacing the Street’s estimate of $110.9 million. This success was attributed to early progress in the company’s partner ecosystem. Confluent Cloud revenue was also robust at $142.7 million, a 34% increase year-over-year, aligning with Street estimates. The company’s overall revenue growth remains strong at 24% year-over-year, with total revenue reaching $963.6 million in the last twelve months. For deeper insights into Confluent’s growth metrics and financial performance, InvestingPro subscribers can access comprehensive analysis and additional ProTips.

Despite the positive results in the first quarter, Confluent’s management provided conservative guidance for the second quarter, with subscription revenue projections of $267-268 million, reflecting a 19% growth. The company also revised its FY25 subscription revenue forecast to $1,100-1,110 million, even with the first quarter’s outperformance. This adjustment was made to account for current uncertainties, leading to a 10% decline in Confluent’s shares in after-hours trading. Currently trading at $23.81, the stock sits between its 52-week range of $17.79 to $37.90, with analyst targets ranging from $22 to $42.

The revised guidance is considered "derisked" by Evercore ISI, as it accounts for a modest decline in growth rates from the second to the fourth quarter, a potential decrease in Net Revenue Retention (NRR), and a gradual recovery from recent optimization slowdowns. Furthermore, the company demonstrated strong operating leverage, with operating margins of 4.3% against estimates of approximately 3%.

Evercore ISI concluded that despite the "beat and lower" scenario impacting the stock’s after-hours performance, the new guidance provides a stable foundation for Confluent. The firm remains optimistic about the company’s growth prospects, citing factors such as the demand for real-time data streaming driven by GenAI workloads, the potential for greater upsell opportunities through Data Streaming Platforms (DSPs), and the expansion of the partner ecosystem to accelerate go-to-market efforts. InvestingPro analysis shows the company maintains a strong balance sheet with more cash than debt, and analysts expect profitability this year despite current losses. Get access to the full Pro Research Report and additional financial insights through an InvestingPro subscription.

In other recent news, Confluent Inc. reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.08, compared to the forecasted $0.07. The company also exceeded revenue projections, posting $271.1 million against an anticipated $264.46 million. Subscription revenue increased by 26% year-over-year, with Confluent Cloud services growing by 34%, meeting expectations, and Platform services exceeding forecasts with an 18% growth. Despite these positive results, Confluent’s stock fell 9.7% in aftermarket trading, reflecting investor concerns over broader market conditions and the company’s cautious outlook. Goldman Sachs analyst Kash Rangan adjusted the price target for Confluent shares, reducing it to $24.00 from $25.00, while maintaining a Neutral rating on the stock. The company provided a conservative outlook due to macroeconomic uncertainties, projecting subscription revenue for FY 2025 between $1.100 billion and $1.110 billion, representing 19-20% growth. Rangan noted that while Confluent’s margin performance showed a positive surprise, future margin upside may be constrained by necessary investments in driving adoption of Confluent’s data streaming platform and enhancing solutions. These recent developments highlight Confluent’s strong growth in customer additions and product adoption, despite facing challenges in the broader economic environment.

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