Why Did Confluent Stock Go Up This Week?

Confluent, a data streaming company, had a great week rising by 9.85%. The rise was largely triggered by an upgrade from Barclays analyst Raimo Lenschow, who changed his rating for the stock to “overweight” and set a $24 per share price target, indicating a further potential upside of 18%.

What does the rating change mean for Confluent and how high could the stock go? We ran a discounted cash flow forecast analysis to ascertain where fair value truly sits.

But first, let’s peel back the onion on what Confluent actually does and why it’s so valuable.

The Proof Is In The Pudding For Confluent

For companies needing to serve customers quickly Confluent comes to the rescue. Confluent was designed to enhance and scale the popular Apache Kafka software, which is used by three-quarters of Fortune 500 companies to stream data.

For example, Amazon’s arch-rival Walmart uses data streaming to create a real-time inventory profile. This allows the company to quickly restock products and reduce the risk of shoppers turning to Amazon or Target. 

Confluent is clearly delivering for its customers. The proof is in the pudding: the financials.

Confluent’s recent financial results for Q3 2022 were impressive by all measures. Management exceeded its own revenue guidance and reported a smaller loss than expected.

A key metric in the report was the 72% year-over-year increase in Confluent’s remaining performance obligations (RPOs – the company’s pipeline of work) to over $660 million. 

Confluent executives have boosted FY 2022 guidance for the third time, now expecting full-year revenue to reach almost $580 million, up almost 50% from a year ago.

A significant portion of Confluent’s growth is coming from large organizations. The company now has over 920 customers spending at least six figures annually, up nearly 40%.

Confluent Valuation

When we ran the numbers on Confluent, we arrived at an intrinsic value of $21.25 per share, a much more pessimistic target than the consensus analyst target price of $33.76 per share.

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