Needham cuts Confluent stock price target to $26, maintains Buy

On Thursday, Needham analysts adjusted the price target for Confluent Inc (NASDAQ:CFLT) shares, reducing it to $26 from the previous target of $40, while keeping a Buy rating on the stock. Currently trading at $23.81, the stock sits below the average analyst target range of $22-$42. According to InvestingPro data, Confluent maintains strong liquidity with a current ratio of 3.99 and holds more cash than debt on its balance sheet. This change follows Confluent’s recent earnings report, which was deemed solid by the analysts.

The Needham team highlighted a particular aspect of the earnings call that was of interest: a group of larger customers began optimizing in March, with the trend continuing into April. Management at Confluent did not link these optimization efforts to macroeconomic factors, instead suggesting that such behavior aligns with historical patterns of customer activity.

In light of these customer optimizations, Confluent’s management has crafted a more cautious revenue guide for the calendar year 2025 (CY25). They anticipate a slower recovery from these optimizations compared to past occurrences, partly due to the current uncertain economic climate. According to Needham’s calculations, the projected revenue from Confluent Cloud has been reduced by approximately 15% for the year.

Despite the lowered revenue expectations, Confluent’s management expressed confidence in their ability to handle potential challenges, referring to "shock absorbers" in their planning that could help navigate any "speed bumps" on the way to achieving their guidance. In response to these developments, Needham has revised its target and estimates for Confluent but reaffirms its Buy rating on the company’s stock. The analysts see the updated guidance as having accounted for possible risks and believe the stock retains its investment appeal despite the target adjustment. InvestingPro analysis suggests the stock is currently undervalued, with analysts predicting profitability this year. Get access to the full Pro Research Report and 6 additional ProTips for deeper insights into Confluent’s financial health and growth potential.

In other recent news, Confluent Inc. reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.08 and revenue of $271.1 million, both exceeding forecasts. Despite the strong financial performance, the company’s stock experienced a decline of nearly 10% in after-hours trading. Confluent’s subscription revenue saw a 26% year-over-year increase, driven by robust growth in both its Platform and Cloud segments. However, the company issued conservative guidance for the remainder of the fiscal year, projecting subscription revenue between $1.100 billion and $1.110 billion, reflecting a cautious outlook amid macroeconomic uncertainties.

In response to these developments, several analyst firms adjusted their price targets for Confluent. Bernstein reduced its price target to $32 while maintaining an Outperform rating, citing mixed results and a conservative future outlook. Evercore ISI also lowered its price target to $28 but kept an Outperform rating, highlighting the company’s strong first-quarter performance and potential for future growth. Meanwhile, Goldman Sachs adjusted its price target to $24, maintaining a Neutral rating, and noted the company’s prudent decision to lower its fiscal year outlook amid broader economic uncertainty.

The company’s management expressed caution regarding current market conditions and indicated a lack of confidence that customers would resume growth as expected in different circumstances. Despite these challenges, Confluent added 340 new customers, marking the highest net additions in three years, and continued to demonstrate strong operating leverage with an improved operating margin. The firm remains optimistic about its long-term prospects, citing demand for real-time data streaming and expansion opportunities through its partner ecosystem.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.