Data streaming is the technology behind many of the real-time experiences on the Internet. It powers the live inventory information you see when shopping online, and your favorite sports betting platform uses it to feed live odds directly to your smartphone.
Confluence (CFLT 0.77%) Leading the data streaming industry. The company just released its fourth-quarter and full-year 2023 results, and investors sent the company’s stock price soaring. In 2024, it’s already up 39%, but it’s still 66% below its all-time high, so there’s still plenty of room to make up for it.
wall street journal tracks 30 analysts covering Confluent stock, with the majority giving it the highest possible Buy rating. No one is recommending selling. This is why it’s a case for investors to follow Wall Street’s advice.
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Why data streaming is so important for the future
Twenty years ago, to watch a movie, you had to go to Blockbuster, rent a DVD disc, and then go home and watch it using your DVD player.But as you know, platforms like Netflix changed everything. Movies are stored in a centralized data center and transmitted to your TV using the Internet. The rise of streaming has eliminated inefficient processes and several layers of clunky hardware.
Data streaming works in much the same way. Years ago, companies collected data from their customers (or their operations), stored it on-site using physical servers, and came back and analyzed it at a later date. Today, companies rent their computing power from technology giants such as: microsoft and Amazon, manage huge centralized data centers. This is called cloud computing.
The cloud allows businesses to generate, process, and analyze data in a single operation. The ability for managers to understand the state of their business in real time is extremely powerful because it allows them to quickly make adjustments to maximize revenue and minimize costs. Additionally, as I mentioned earlier, it also helps you serve your customers more effectively through live experiences.
for example, domino pizza used Confluent to build a real-time analytics platform for franchise owners so they can see what’s happening in their stores at any time. We also use Confluent to create targeted marketing campaigns based on data received from a wide range of digital sales channels.
walmart We use Confluent for real-time inventory management. The company connects all its physical and online sales channels, allowing it to replenish inventory before shelves are emptied when products sell. This makes Walmart a reliable choice for customers.
Confluent finishes off a great 2023 with strong fourth quarter
Confluent enters the fourth quarter of 2023 with expected revenue of $205 million. Sales increased 26% year over year to $213 million, exceeding management’s expectations.
With this result, the company reported a 33% increase in total revenue to $777 million in 2023, capping off a strong performance.
Confluent’s highest-spending customer cohorts drove growth. The company served 4,960 companies at the end of 2023, with 1,229 spending more than $100,000 annually (up 21% year over year) and 158 spending at least $1 million. (up 24%).The number of customers who spend at least $5 million annually doubled. These numbers highlight how important data streaming has become for large organizations.
But it gets better. Additionally, Confluent’s net revenue retention rate was 125%. This means that existing customers spent 25% more with the company in 2023 than in 2022. Management gave examples of customers who started with small investments in Confluent’s platform and have since increased their spending 12-276x over the past few years.
Despite its strong performance last year, Confluent has only scratched the surface of what the company estimates is a $60 billion opportunity in the data streaming space. This addressable market could grow to $100 billion by 2025.
Wall Street is very bullish on Confluent stock
wall street journal tracks 30 analysts covering Confluent stock, and 17 of them have given the company a top rating of Buy. A further 3 are in the overweight (bullish) camp and 9 recommend a hold. 1 analyst(s) rate the stock as Underweight, while none recommend Sell.
Their average price target is $32.94, which is only slightly higher than the price Confluent stock is trading at as of this writing. But Wall Street’s price target could be revised upward as analysts analyze the company’s latest results, especially considering the stock has already soared more than 39% in 2024.
Confluent is still 66% below its all-time high reached during the height of the 2021 tech frenzy. Investors had given Confluent an ambitious valuation at the time, and the selloff now represents a great buying opportunity, given that the company has gone from strength to strength. As Confluent acquires more and more large addressable markets in the coming years, investors who hold the company’s stock for the long term will be rewarded.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Confluent, Domino’s Pizza, Microsoft, Netflix, and Walmart. The Motley Fool recommends the following options: His long January 2026 $395 call on Microsoft and his short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
