UBS raises Confluent stock rating, lifts target to $38 from $34

On Wednesday, UBS analyst Austin Dietz issued an upgrade for Confluent Inc (NASDAQ:CFLT) stock, changing the rating from Neutral to Buy and increasing the price target to $38.00, up from the previous $34.00. This adjustment reflects a more optimistic outlook on the company’s future performance. According to InvestingPro data, analysts’ targets for Confluent range from $30 to $42, with 17 analysts recently revising their earnings estimates upward for the upcoming period.

Dietz’s decision to upgrade the stock comes after conducting discussions with nine customers and partners of Confluent. These conversations have led to a positive view on the company’s revenue growth potential, specifically in subscription revenues for the years 2025 and 2026. UBS’s projections now stand at 24% and 23% growth, respectively, which surpasses the consensus estimates of 22% and 21%. The company has already demonstrated strong growth momentum, with revenue increasing by 24% in the last twelve months and maintaining an impressive gross profit margin of 73.28%.

The discussions also highlighted the early signs of General AI technology contributing to Confluent’s offerings. Customers and partners mentioned that this emerging technology is beginning to have a pull-through effect on Confluent’s business.

Another factor contributing to the upgraded rating is the current competitive landscape. According to UBS, Confluent’s position relative to hyperscale cloud service providers is stable and may even be improving slightly. This stability is seen as a positive sign for Confluent’s market position.

Lastly, UBS views Confluent’s strategic move into the higher-growth analytics sector as a long-term benefit for the company. Initiatives like Tableflow, Flink, and the partnership with Databricks are expected to bolster Confluent’s offering in the real-time operational analytics space, further strengthening its market presence.

The upgrade and price target adjustment by UBS reflect a more bullish stance on Confluent’s stock, anticipating that the company’s strategic initiatives and market position will lead to robust growth in the coming years. For deeper insights into Confluent’s valuation and growth prospects, InvestingPro subscribers can access comprehensive financial health scores, detailed Fair Value analysis, and additional ProTips that provide valuable context for investment decisions.

In other recent news, Confluent Inc has reported strong financial results, which have prompted several analysts to raise their price targets for the company. Citi analyst Tyler Radke increased the target to $37, citing solid cloud revenue performance and improved profitability. Meanwhile, TD Cowen analysts raised their target to $41, highlighting a 24% growth in subscription revenue and a promising forecast for fiscal year 2025. RBC Capital Markets also adjusted their target to $41, reflecting confidence in Confluent’s market position and growth potential, especially in the cloud and data stream processing segments.

DA Davidson analysts set their new target at $42, noting a robust fourth-quarter performance with a 38% year-over-year increase in cloud revenue. They maintain a positive outlook on Confluent’s long-term growth prospects. Bernstein analysts raised their target to $35, acknowledging Confluent’s strong fourth-quarter results and cloud revenue growth that exceeded expectations. Despite a slight downward adjustment in revenue estimates due to broader industry trends, Bernstein continues to rate Confluent as Outperform.

The company’s strategic partnerships, particularly with Databricks, have been positively received across the board, contributing to the optimistic outlook. The overall sentiment from analysts suggests a strong belief in Confluent’s potential for continued success in the streaming market.

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