Shares of data streaming and cloud computing company Confluent (CFLT) jumped 25% on Wednesday as investors and analysts turned up the bullish vibes on the stock for a variety of reasons. Here we look at some of the factors behind the rally and why the stock is up 35% YTD.
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1) CFLT Earnings Beat
First, CFLT posted Fiscal fourth quarter numbers that beat expectations. Sales of $261 million, up 23%, and adjusted earnings of $0.09 per share, easily beat Wall Street estimates of $257 million and $0.06 respectively.
For Fiscal 2024 as a whole, Cloud revenue was up 41% year over year to $492 million and Subscription revenues rose 26% to $922 million.
Q4 Subscription revenue was up 24% to $251 million and the company guided for modest sequential growth to around $253 million in Q1 2025. However, full-year Fiscal 2025 Subscription is seen rising between 20% and 22% towards $1.12 billion.
2) CFLT Builds on Databricks Partnership
Alongside the results, CFLT also announced a major expansion of its partnership with data and AI business Databricks. The deal is aimed to enhancing businesses’ real-time access to analytics and AI.
The partnership will help companies keep all their data, AI, analytics and governance “all in one place,” said Ali Ghodsi, co-founder and CEO of Databricks.
Jay Kreps, co-founder and CEO of Confluent, said companies are often held back by disconnected systems that fail to deliver the data they need, in the format they need.
“Together with Databricks, we’re ensuring businesses can harness the power of real-time data to build sophisticated AI-driven applications for their most critical use cases,” he said.
3) Jio Teams with CFLT
Confluent also announced a deal that sees it become the first data streaming platform available on India’s Jio Cloud Services.
Under the deal, Confluent Cloud will be available on Jio Cloud Services, while the Confluent Platform will be offered as a managed service for Indian consumers and enterprises.
Kiran Thomas, President and CEO, Jio Platforms Limited, said that the deal would “enable our customers to deliver the real-time, intelligent capabilities everyone expects.”
Analysts Raise Price Targets
The updates provoked analysts to raise price targets on CFLT.
Scotiabank raised the firm’s price target on Confluent to $35 from $27, citing the strong finish to 2024, solid 2025 guidance and the partnership expansion with Databricks.
Truist analyst Miller Jump raised the firm’s price target on Confluent to $40 from $35 and kept a Buy rating on the shares.
Mizuho raised from $32 to $38, Oppenheimer went from $37 to $40, and UBS lifted its price target from $26 to $34. There were also price target upgrades at Piper Sandler, Needham and TD Cowen.
Is CFLT a Good Stock to Buy?
Following the analyst updates, CFLT is rated a Moderate Buy, based on 18 Buys, seven Holds and one Sell. The average CFLT price target of $37.44 suggests 0.5% downside after the sharp rally in the stock.
