Why Confluent Stock Is Skyrocketing This Week

Confluent (CFLT -0.46%) stock is posting explosive gains in this week’s trading. The data streaming specialist’s share price was up 35.4% from last week’s market close as of 9:45 a.m. ET this Friday, according to data from S&P Global Market Intelligence.
Confluent posted its fourth-quarter earnings results after the market closed on Feb. 7 and reported sales and profits that beat Wall Street’s targets. The company posted non-GAAP (adjusted) earnings per share of $0.09 on sales of $213.8 million, topping the average analyst estimate’s call for per-share earnings of $0.05 on sales of $205.56 million.

Confluent’s business momentum surprised in Q4
Confluent’s sales rose roughly 26.4% year over year in the fourth quarter, and the business also posted encouraging progress on the margins front. The business’s adjusted operating margin improved to 5.3% — up from a margin of -21.5% in last year’s quarter.
Confluent also posted free cash flow of $6.8 million in the quarter, improving from a cash outflow of $30.9 million in the prior-year period. Subscription revenue for the quarter rose 31% year over year to reach $203 million, and revenue from the Confluent cloud unit jumped 46% to hit $100 million.
Confluent closed out 2023 with sales of roughly $777 million, up 33% on an annual basis. It looks like strong momentum is poised to continue for the business this year.
What comes next for Confluent?
For the first quarter of 2024, Confluent is guiding for sales to come in between $211 million and $212 million. The company’s adjusted net income per share is projected to be between $0 and $0.02.
For the full-year period, management expects revenue of roughly $950 million — suggesting annual growth of approximately 22%. Adjusted earnings per share are expected to come in at approximately $0.17. The company posted adjusted earnings per share last year and it’s guiding for profits to more than quadruple in 2024.
Valued at roughly 10.5 times management’s sales estimate, Confluent’s valuation is looking even more growth-dependent on the heels of its recent stock surge. But signs of substantial margin improvement and continued revenue growth momentum suggest the company’s share price could still have room to run.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Confluent. The Motley Fool has a disclosure policy.

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