Analyst Derrick Wood from TD Cowen maintained a Hold rating on Confluent and increased the price target to $31.00 from $27.00.
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Derrick Wood has given his Hold rating due to a combination of factors surrounding Confluent’s acquisition by IBM. The agreed acquisition price of $31 per share represents a significant premium over the pre-announcement price, which aligns with the adjusted price target. However, the valuation metrics such as the EV/TTM Sales multiple are slightly below what IBM has paid for similar acquisitions in the past, indicating a cautious approach.
Additionally, while the acquisition is expected to face minimal antitrust issues due to the open-source nature of Confluent’s products and limited overlap with IBM’s offerings, there are still considerations regarding market share dynamics. IBM’s existing presence in the Event Broker & Messaging software market could draw some scrutiny, although the broader context of open-source Kafka deployments suggests regulatory concerns may be mitigated. These factors combined lead to a Hold rating, reflecting a balanced view of potential risks and rewards associated with the acquisition.
According to TipRanks, Wood is a 4-star analyst with an average return of 6.2% and a 48.99% success rate. Wood covers the Technology sector, focusing on stocks such as Oracle, Adobe, and Salesforce.
In another report released today, Canaccord Genuity also downgraded the stock to a Hold with a $31.00 price target.