Confluent (CFLT) AI Stock Analysis

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Confluent

(NASDAQ:CFLT)

66Neutral

Confluent's strong revenue growth and improving cash flow drive a positive outlook, despite current lack of profitability. Technical indicators show bearish trends, suggesting caution. The earnings call highlights significant achievements and partnerships, enhancing the stock's prospects. However, valuation concerns persist due to ongoing net losses.

Positive Factors

Executive Leadership

The promotion of Ryan Mac Ben to Chief Revenue Officer should be relatively seamless, as he had been working with Ms. Schultz since joining the organization.

Partnerships

Confluent's partnership with Databricks unlocks more sales opportunities in an AI-driven space where real-time data is necessary.

Product Innovation

Customer excitement is noted around Tableflow, which just went GA, and is seen as a potential new product catalyst.

Negative Factors

Executive Changes

With any executive shift, execution risks are raised over the near-term.

Leadership Departure

There is disappointment regarding the departure of Erica Schultz, President of Field Operations, due to her effective leadership in scaling the organization.

Stock Performance

Shares are down approximately 40% from February peak levels and now trade at about 5x EV/CY26E Sales, with the stock price near past trough levels.

Confluent (CFLT) vs. S&P 500 (SPY)

Market Cap

$8.36B

Dividend YieldN/A

Average Volume (3M)4.64M

Price to Earnings (P/E)―

Beta (1Y)1.48

Revenue Growth24.03%

EPS Growth27.45%

CountryUS

Employees3,060

SectorTechnology

Sector Strength63

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)-1.07

Shares Outstanding285,862,580

10 Day Avg. Volume3,758,223

30 Day Avg. Volume4,644,844

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.01

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit11.91

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$33.18

Price Target Upside37.91% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering30

Confluent Business Overview & Revenue Model

Company DescriptionConfluent, Inc. operates a data streaming platform in the United States and internationally. It offers Confluent Cloud, a managed cloud-native service for connecting and processing data; and Confluent Platform, an enterprise-grade self-managed software that connects and processes data in real-time with the foundational platform for data in motion. It also provides Kafka Connect that enables to build connectors to integrate Apache Kafka with other apps and data systems; ksqlDB, a database for stream processing applications; and stream governance, a solution that is designed for the intricacies of streaming data, which allows teams to expand usage of real-time data without bypassing requirements for risk management and regulatory compliance. In addition, it also offers training and professional services. The company was formerly known as Infinitem, Inc. and changed its name to Confluent, Inc. in September 2014. Confluent, Inc. was incorporated in 2014 and is headquartered in Mountain View, California.

How the Company Makes MoneyConfluent generates revenue primarily through a subscription-based model for its Confluent Cloud and Confluent Platform offerings. Confluent Cloud, a fully managed service, is available on major cloud providers like AWS, Google Cloud, and Microsoft Azure, with pricing based on consumption, allowing users to scale as needed. The Confluent Platform, offered as a software license, provides additional enterprise features and support for on-premises or hybrid cloud deployments. Additional revenue streams include professional services and training to help organizations implement and optimize their data streaming capabilities. Significant partnerships with cloud providers and a strong ecosystem of technology partners amplify Confluent's reach and enhance its service offerings, contributing to its revenue growth.

Confluent Key Performance Indicators (KPIs)

Any

Customers Over $100,000 Annual Recurring Revenue

Customers Over $100,000 Annual Recurring Revenue
Highlights the number of high-value clients generating significant recurring revenue, indicating the company's success in attracting and retaining large-scale customers and its ability to secure stable, predictable income.

Chart InsightsConfluent's customer base with over $100K ARR has shown consistent growth, reaching 1,381 by the end of 2024, a 12% increase from the previous year. This expansion aligns with the company's strong subscription revenue growth and strategic partnerships, such as with Databricks, which are driving AI-driven decision-making capabilities. Despite minor concerns about deferred revenue timing, the robust increase in high-value customers underscores Confluent's solid market position and potential for continued revenue growth, as reflected in their optimistic FY 2025 guidance.

Data provided by:

Main Street Data

Confluent Financial Statement Overview

Summary

Confluent shows strong revenue growth and improved cash flow, but remains unprofitable with negative net and operating margins. The balance sheet indicates manageable leverage but needs better profitability.

Income Statement

Positive

Confluent has demonstrated strong revenue growth, with a TTM revenue increase of 24% compared to the previous year. The gross profit margin stands at 73.3%, indicating effective cost management. However, the company remains unprofitable with a net profit margin of -35.8% and negative EBIT and EBITDA margins, reflecting ongoing operational challenges.

Balance Sheet

Positive

The balance sheet shows a moderate debt-to-equity ratio of 1.15, indicating manageable leverage. The return on equity (ROE) is negative due to the company's net losses. The equity ratio is 35.7%, suggesting a balanced asset structure, but the company needs to improve profitability for a stronger financial position.

Cash Flow

Positive

The company has improved its cash flow position, achieving a positive operating cash flow of $33.5 million in the TTM, compared to negative figures in previous years. Free cash flow growth is significant, moving from negative to positive, which is a positive sign. However, the free cash flow to net income ratio is still constrained by net losses.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
963.64M	776.95M	585.94M	387.86M	236.58M
	Gross Profit
706.17M	547.28M	383.53M	250.57M	161.10M
	EBIT
-419.15M	-443.92M	-462.67M	-339.62M	-233.18M
	EBITDA
-419.15M	-430.01M	-455.05M	-335.99M	-231.61M
	Net Income Common Stockholders
-345.06M	-442.75M	-452.55M	-342.80M	-229.83M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.91B	1.90B	1.93B	2.02B	288.55M
	Total Assets
2.69B	2.46B	2.34B	2.34B	526.12M
	Total Debt
1.11B	1.11B	1.12B	1.12B	50.93M
	Net Debt
724.00M	763.83M	681.23M	-254.35M	14.14M
	Total Liabilities
1.73B	1.65B	1.58B	1.49B	832.37M
	Stockholders Equity
961.23M	810.41M	769.48M	850.28M	-306.25M
Cash Flow		Free Cash Flow
9.49M	-124.34M	-171.79M	-114.00M	-86.71M
	Operating Cash Flow
33.46M	-103.66M	-157.33M	-105.06M	-82.06M
	Investing Cash Flow
-74.98M	-84.85M	-865.80M	-400.58M	-176.86M
	Financing Cash Flow
79.81M	102.37M	82.24M	1.84B	276.76M

Confluent Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price24.06

Price Trends

50DMA

25.78

Negative

100DMA

27.91

Negative

200DMA

25.51

Negative

Market Momentum

MACD

-0.56

Negative

RSI

53.61

Neutral

STOCH

94.13

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CFLT, the sentiment is Neutral. The current price of 24.06 is above the 20-day moving average (MA) of 21.94, below the 50-day MA of 25.78, and below the 200-day MA of 25.51, indicating a neutral trend. The MACD of -0.56 indicates Negative momentum. The RSI at 53.61 is Neutral, neither overbought nor oversold. The STOCH value of 94.13 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CFLT.

Confluent Risk Analysis

Confluent disclosed 74 risk factors in its most recent earnings report. Confluent reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Confluent Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DBX	73 Outperform	$8.18B	20.26	-60.11%	―	1.86%	6.21%
PATH	67 Neutral	$6.40B	―	-3.82%	―	9.30%	20.59%
MDB	66 Neutral	$13.17B	―	-6.70%	―	19.22%	28.46%
CFLT	66 Neutral	$8.36B	―	-38.95%	―	24.03%	27.45%
S	64 Neutral	$6.09B	―	-17.68%	―	32.25%	20.56%
INFA	61 Neutral	$6.56B	624.42	0.44%	―	2.81%	―
Sector *	59 Neutral	$10.71B	10.35	-6.77%	3.02%	7.32%	-11.27%

* Technology Sector Average

Performance Comparison

CFLT

Confluent

24.06

-4.06

-14.44%

MDB

MongoDB

174.69

-190.49

-52.16%

DBX

Dropbox

28.67

5.51

23.79%

PATH

UiPath

11.82

-7.15

-37.69%

SentinelOne

18.78

-2.35

-11.12%

INFA

Informatica

18.93

-12.04

-38.88%

Confluent Earnings Call Summary

Earnings Call Date:Feb 11, 2025

(Q4-2024)

% Change Since: -20.07%|

Next Earnings Date:Apr 30, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong performance by Confluent, with significant growth in subscription revenue and the achievement of non-GAAP profitability for the first time. The major partnership with Databricks and robust customer growth underscore the positive momentum. However, there are minor concerns related to deferred revenue timing and a one-time free cash flow impact.

Q4-2024 Updates

Positive Updates

Exceeding Guided Metrics

Confluent exceeded all guided metrics for the quarter. Subscription revenue grew by 24% to $251 million, Confluent Cloud revenue increased by 38% to $138 million, and the non-GAAP operating margin was 5%.

Major Partnership with Databricks

Confluent announced a major expansion of its strategic partnership with Databricks. The integration aims to empower enterprises with real-time data for AI-driven decision-making.

First Non-GAAP Profitable Year

Fiscal Year 2024 marked Confluent's first non-GAAP profitable year, with a subscription revenue increase of 26% to $922.1 million.

Strong Customer Growth

Confluent ended fiscal year 2024 with approximately 5,800 customers, representing an increase of 840 customers year over year.

Robust Expansion in Large Customers

The company grew its 100K+ ARR customer count to 1,381, an increase of 12% from a year ago, representing approximately 90% of revenue.

Negative Updates

Deferred Revenue Timing

Changes in deferred revenue are primarily driven by timing of large Confluent Platform multiyear deals, indicating some variability in revenue recognition.

One-Time Free Cash Flow Impact

A one-time negative impact of approximately 15 points to Q1, 2025's free cash flow margin is expected due to a change in timing of cash compensation payments.

Company Guidance

During the Confluent Q4 and Fiscal Year 2024 earnings call, management reported surpassing all guided metrics. Subscription revenue increased by 24% to $251 million, and Confluent Cloud revenue grew by 38% to $138 million. The company's non-GAAP operating margin stood at 5%, marking the third consecutive positive quarter. Fiscal Year 2024 subscription revenue rose by 26% to $922.1 million, with a non-GAAP operating margin improvement of 10 percentage points to 2.9%. For FY 2025, the company anticipates subscription revenue between $1.117 billion to $1.121 billion, reflecting a growth of 21% to 22%, and a non-GAAP operating margin of approximately 6%.

Confluent Corporate Events

Executive/Board Changes

Confluent CTO Chad Verbowski Announces Retirement Plan

Neutral

Nov 14, 2024

Chad Verbowski, the Chief Technology Officer of Confluent, Inc., will retire on November 26, 2024, to take a career break but will remain an advisor until February 21, 2025, ensuring a smooth transition. During this period, the engineering team will report to the CEO, as the company seeks a replacement. Confluent acknowledges Verbowski’s significant contributions to its engineering success.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.