Evercore ISI lifts Confluent stock price target to $40

On Wednesday, Evercore ISI analyst Chirag Ved increased the price target for Confluent Inc (NASDAQ:CFLT) to $40.00, up from the previous $32.00, while maintaining an Outperform rating. The revision follows Confluent’s strong performance in both top-and-bottom line results and its initial FY25 guidance surpassing Street expectations. According to InvestingPro data, the stock has shown impressive momentum with a 49% gain over the past six months, though current analysis suggests it may be slightly overvalued at its current price of $30.1.

Confluent, known for its data streaming platform, is expected to sustain a growth rate of over 20% into FY25, building on its current revenue growth of 25%. This growth is anticipated due to several factors, including the expanding adoption of the company’s Data Streaming Platform (DSP) portfolio, the integration of Flink into more significant workstreams, and the rising demand for real-time data streaming driven by GenAI workloads. Additionally, new products such as TableFlow and Freight Clusters, along with partnerships with companies like Jio and Databricks, are projected to contribute to incremental revenue. InvestingPro subscribers can access detailed growth forecasts and 7 additional key insights about Confluent’s future prospects.

The company’s recent performance indicators have been positive, with a stable Net Revenue Retention (NRR) rate of 117% quarter over quarter. Revenue from DSP products is growing significantly faster than overall cloud revenue, now accounting for 13% of Cloud revenue, approximately $18 million. Moreover, Confluent’s customer base has expanded to 5,800, an increase of 120 customers. Notably, the number of large customers has also seen growth, with 1,381 customers generating over $100,000 in Annual Recurring Revenue (ARR), up by 35, and 194 customers bringing in over $1 million in ARR, an increase of 10 customers. The company maintains an impressive gross profit margin of 73.16%, though InvestingPro analysis shows it’s still working toward profitability, with analysts expecting positive earnings this year.

The price target set by Evercore ISI implies a valuation of 11 times the enterprise value to the projected CY25 revenue for Confluent. The analyst’s outlook suggests that the company is on a solid trajectory to continue its growth and market presence in the coming years, supported by its strong balance sheet with more cash than debt and a healthy current ratio of 4.24.

In other recent news, Confluent Inc. has been the subject of several analyst updates. Goldman Sachs raised its price target for the company to $30 after Confluent reported a 23% year-over-year revenue increase in its fourth-quarter earnings for fiscal year 2024, slightly above the consensus estimate. Confluent’s cloud segment witnessed a 38% growth year-over-year, surpassing the consensus projection of 35%. However, the company’s free cash flow margin came in at 11%, below the consensus of 13%.

Confluent also announced a significant expansion of its partnership with Databricks, introducing new integrations aimed at bolstering AI-driven decision-making for enterprises. The collaboration enhances real-time data accessibility for AI applications by combining Confluent’s Data Streaming Platform with Databricks’ Data Intelligence Platform.

On the analyst front, JMP Securities reiterated a Market Outperform rating with a $40.00 price target for Confluent, recognizing the company’s position within a substantial total addressable market estimated to be worth $60 billion. TD Cowen also showed confidence in Confluent, raising the company’s price target from $31.00 to $37.00 while maintaining a Buy rating. These adjustments reflect recent developments and the company’s potential for growth and long-term capital appreciation.

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