Rapidly Growing Investment Option: Don't Miss Out on Purchasing This Wonderful Company's Shares Before It's Too Expensive
Rewritten Article:
Confluent's (CFLT -2.08%) stock has seen a remarkable surge over the past six months, with a staggering 59% increase as of the latest update. This impressive performance is poised to continue, given the positive response to its fourth-quarter 2024 results.
Indeed, the company's latest quarterly report, released on February 11, resulted in a 25% stock price increase the following day, fueled by stronger-than-expected growth and optimistic guidance that surpassed Wall Street's expectations.
Let's delve into the factors driving Confluent's success and the reasons its growth may not be slowing down despite recent gains.
Booming Customer growth and spending point toward a bright future
Confluent's cloud-based data streaming platform allows customers to consolidate data from various silos into a single platform for efficient storage, access, and management, in real-time. Optimistic projections suggest that the company's total addressable market could reach $100 billion by the end of the year. This indicates that Confluent is just scratching the surface of a vast opportunity, considering its 24% revenue growth in 2024, reaching $964 million.
Beyond acquiring new customers, Confluent's existing customer base is also spending more. The rise of artificial intelligence (AI) is one of the main factors enabling Confluent to secure a larger share of its customers' spending. Management anticipates that the increasing adoption of AI agents could boost demand for its data streaming platform. Already, Confluent's customers use data streaming for tasks such as developing AI-driven chatbots and generating content.
Confluent's dollar-based net retention rate reached an impressive 117% in the previous quarter, measured by the trailing-12-month (TTM) annual recurring revenue (ARR) from its customers. A rate over 100% suggests that Confluent's services have proven to be sticky as existing customers spend more over time.
Moreover, the number of customers with an ARR of more than $1 million surged 23% year-over-year, outpacing the 17% expansion in the total customer base. This growth trajectory is helping to improve Confluent's margin profile and fueling impressive earnings growth.
Confluent reported an almost sevenfold jump in its bottom line last year, reaching $0.29 per share, handily exceeding its original guidance of $0.17 per share. Management remains bullish on the AI wave's potential impact, expressing confidence that it will act as a tailwind.
Chief Financial Officer Rohan Sivaram noted on the recent earnings call: "By increasing consumption of our data streaming platform, we help customers realize substantial ROI for powering their mission-critical and real-time AI workloads. As we drive ROI-based expansions throughout our customers' data streaming journey, we expect our growth and profitability profile to strengthen over time."
It's still the right time to buy the stock
Management expects a 21% upward trajectory for its earnings in 2025, reaching $0.35 per share, along with a 16% revenue increase. However, Confluent surpassed expectations in 2024 and may do the same in 2023, thanks to strengthening partnerships.
For instance, Confluent has formed a multiyear strategic partnership with Jio Platforms Limited, an Indian multinational technology company that's a division of Reliance Industries. Customers can now access Confluent's cloud platform through JioCloud Services. This deal could open a vast potential customer base, given that Confluent is the first data streaming services provider to offer its service on Jio.
Furthermore, Confluent expanded its partnership with Databricks, combining its data streaming platform with Databricks' data intelligence platform. The collaboration aims to empower enterprises with real-time data for AI-driven decision-making. Databricks is an important player in big data analytics, with an estimated 60% growth in ARR by the end of 2024. These partnerships could pave the way for Confluent to win more customers and grow faster than originally projected.
Consensus estimates predict an even greater earnings jump in 2026. Confluent's price/earnings-to-growth ratio (PEG) of 0.8, based on the earnings growth expected over the next five years (according to Yahoo! Finance), suggests that its stock may be undervalued. A PEG ratio under 1 generally indicates that a stock is undervalued, considering the bottom-line growth it could deliver over the next five years.
Thus, in light of Confluent's massive addressable market, an expanding customer base, and the catalysts of AI and robust partnerships, it may not be too late to invest in this high-flying growth stock.
- Investors looking to diversify their finance portfolio might find interest in Confluent's stock, as its impressive 59% surge over the past six months indicates a strong performance in the investing market.
- Confluent's success in the finance sector can be partially attributed to its cloud-based money streaming platform, which has allowed its customers to manage their data more effectively, leading to a projected total addressable market of $100 billion by the end of the year.
- The company's strategic partnership with Databricks in the realm of data intelligence could further boost Confluent's stock value, as the collaboration aims to provide real-time data for AI-driven decision-making, potentially attracting more customers and accelerating growth.
- With a PEG ratio of 0.8 and strong potential earnings growth projected for 2026, Confluent's stock might still be a valuable investment opportunity for those looking to finance in a high-flying growth sector, such as streaming and data technologies, by the year 2026.
