Goldman Sachs raises Confluent stock price target to $30

On Wednesday, Goldman Sachs analyst Kash Rangan updated the firm’s stance on Confluent Inc (NASDAQ:CFLT), increasing the price target to $30.00 from the previous $29.00 while maintaining a Neutral rating. The adjustment came after Confluent reported its fourth-quarter earnings for fiscal year 2024, which displayed a 23% year-over-year revenue increase, slightly above the consensus estimate. According to InvestingPro data, the company has maintained strong growth with a 25% revenue increase over the last twelve months, while maintaining an impressive gross profit margin of 73%.

Confluent’s cloud segment experienced a notable 38% growth year-over-year, surpassing the consensus projection of 35%. However, the company’s free cash flow margin (FCFM) came in at 11%, which was below the consensus of 13%. Despite this, the after-hours stock price suggested a positive investor response, with an implied increase of over 13%, likely due to the company’s performance and its guidance for subscription revenue growth of 21-22% year-over-year for the calendar year 2025. InvestingPro analysis reveals the stock has shown strong momentum with a 49% price return over the past six months, though current valuations suggest the stock may be trading above its Fair Value.

The analyst highlighted several strengths from Confluent’s recent earnings report, including a stable net expansion rate (NER) at 117% and an improvement in win rates against cloud service providers (CSPs) and smaller startups, with success rates over 90%. Additionally, the data streaming platform (DSP) has become a more significant contributor to growth, now accounting for 13% of cloud revenue. InvestingPro Tips indicate that while the company isn’t currently profitable, analysts expect profitability this year. The company maintains a strong financial position with a current ratio of 4.24, indicating robust liquidity. Get access to 5 additional InvestingPro Tips and comprehensive analysis through the InvestingPro platform.

Despite these positive indicators, the analyst expressed a need for more definitive signs of long-term category evolution that could support stabilization or an inflection in subscription revenue. The report noted a slowdown in net new customers to 120, which is lower compared to previous quarters, and a number of $1 million annual recurring revenue (ARR) customers that have not yet returned to levels seen prior to changes in the go-to-market strategy. Goldman Sachs is seeking a consistent trend that would affirm the longer-term benefits of strategic actions taken over the past two years. With a market capitalization of $9.87 billion, Confluent represents a significant player in its space, though it currently trades at a high revenue multiple according to InvestingPro metrics.

Before adopting a more constructive stance on Confluent, Goldman Sachs is looking for visibility around the total addressable market (TAM) expansion potential for General AI, a return to management’s targets of 120-125% NER, sustained cloud outperformance, and clarity on the company’s Rule-of standing.

In other recent news, Confluent Inc. has been the subject of several significant developments. JMP Securities maintained a Market Outperform rating on Confluent’s stock, with a target price of $40. This endorsement is based on the firm’s confidence in Confluent’s position in the data streaming market and its potential for growth. Similarly, TD Cowen analysts raised Confluent’s price target from $31.00 to $37.00, maintaining a Buy rating. This adjustment anticipates a robust fourth-quarter beat with subscription growth exceeding 3% and a 21% increase in total revenue growth.

However, Morgan Stanley (NYSE:MS) downgraded Confluent’s stock from Overweight to Equalweight, reducing the price target to $30.00. The firm cited slow adoption rates of Confluent’s services and overly optimistic revenue estimates for 2025 as reasons for this adjustment.

In terms of company news, Confluent and Databricks have announced a significant expansion of their partnership. New integrations between Confluent’s Tableflow and Databricks’ Unity Catalog aim to enhance real-time data accessibility for AI applications. These developments are recent and provide investors with a snapshot of Confluent’s current position and future prospects.

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