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On Wednesday, Stifel analysts increased the price target for Confluent Inc (NASDAQ:CFLT), a data streaming platform, from $37.00 to $40.00, while keeping a Hold rating on the shares. The adjustment follows Confluent’s recent earnings report, which showed positive results and a steady net retention rate (NRR) of 117%. According to InvestingPro data, the company maintains strong financial flexibility with a healthy current ratio of 4.24, though it’s currently trading above its Fair Value.
Confluent’s performance was bolstered by stable consumption trends, broader use case applications, and growing adoption of its Dedicated Streaming Platform (DSP), now accounting for 13% of its cloud revenue, up from 10% in the first quarter of 2024. The company’s cloud revenue slightly exceeded expectations, with InvestingPro data showing impressive revenue growth of 25.01% and a robust gross profit margin of 73.16%. The sequential increase in dollars added was less compared to the third quarter. Stifel noted that if one-time unused credit revenue from the previous quarter were excluded, the sequential dollars added would likely have been roughly flat operationally.
The company’s guidance for subscription revenue in the first quarter of 2025 and the full year of 2025 was marginally higher than what analysts had anticipated. Stifel’s evaluation suggests that Confluent is well-positioned to maintain revenue growth exceeding 20% and improved profitability in the coming years. This optimistic outlook is supported by a significant opportunity for Confluent to convert users of open-source Kafka, a growing adoption of its DSP, increased sales productivity, and a substantial number of customers approaching their expansion phase.
Stifel is also looking ahead to Confluent’s analyst day in March, where the firm anticipates a detailed discussion on the company’s growing Serviceable Addressable Market (SAM) and an update to its financial model.
In other recent news, Confluent Inc. has seen several adjustments to its stock price target following its strong fourth-quarter 2024 results. BofA Securities raised the price target from $26 to $31, citing better-than-expected subscription revenue, total revenue, and non-GAAP operating income. Evercore ISI lifted its price target to $40 based on Confluent’s top-and-bottom line results and initial FY25 guidance surpassing expectations. Goldman Sachs increased its price target from $29 to $30 after Confluent reported a 23% year-over-year revenue increase. JMP Securities maintained a $40 price target, highlighting Confluent’s position as a leader in the data streaming platform market.
Confluent’s recent developments include a significant expansion of its partnership with Databricks, introducing new integrations aimed at enhancing real-time data accessibility for AI applications. This collaboration combines Confluent’s Data Streaming Platform with Databricks’ Data Intelligence Platform, addressing the common challenge of data silos in enterprise IT infrastructure. The integration of Confluent’s Tableflow and Databricks’ Unity Catalog aims to provide seamless governance over data, facilitating the construction of AI applications.
Analysts from BofA Securities, Evercore ISI, Goldman Sachs, and JMP Securities have all shown optimism about Confluent’s recent performance and future prospects. Despite this, certain challenges were highlighted, such as the need for more definitive signs of long-term category evolution to support stabilization or an inflection in subscription revenue, as well as the company’s revenue growth and operating margin profile for 2025 not keeping pace with the average of its infrastructure software peers.
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