1 Growth Stock Down 36% To Buy Before It’s Too Late

Actions of Confluence (NASDAQ: CFLT) Streaming data sales started 2024 on a positive note, climbing nearly 50% in the first two months of 2024. But things have since gone downhill for the streaming data provider, which is down 36% from its year-to-date high.

Confluent stock is now down for the year, underperforming the Nasdaq-100 Technology Sector The stock took another hit after reporting its second-quarter results on July 31, falling 18% in a single session.

However, a closer look at Confluent’s quarterly performance and the end market opportunity it sits in indicates that this stock is a buy. technology actions This could turn out to be a smart move in the long run.

Confluent Sees Steady Growth Despite Headwinds

Confluent reported second-quarter revenue of $235 million, up 24% from a year earlier and beating management’s forecast of $229 million to $230 million. The company also reported adjusted earnings of $0.06 per share, also above expectations of $0.04 to $0.05 per share.

The company offers a cloud-based data streaming platform that allows its customers to connect and process their data streams in real time. This is in contrast to the traditional method of storing data at rest in silos and processing it in batches later.

However, customers using Confluent’s real-time platform are realizing more value from their data for a variety of applications such as dynamic pricing, shipment tracking, customer service, Internet of Things, and artificial intelligenceamong others. Management estimates that its total addressable market was worth approximately $60 billion in 2022, and could reach approximately $100 billion by 2025.

So the company is ahead of its time to capitalize on this massive revenue opportunity, with analysts forecasting annual revenue of $955 million this year, up 23%. More importantly, Confluent has built a strong customer base and is also gaining a larger share of their wallet, even in what management described on the earnings call as “a continuing volatile macroeconomic environment.”

This is evidenced by the fact that its overall customer base grew by 13% year-over-year to 5,440. However, the number of customers with annual recurring revenue (ARR) above $1 million grew at a faster rate of 20%. At the same time, the number of customers with ARR above $100,000 grew by 14%.

Confluent’s ARR refers to the amount of contractual revenue the company has committed to collecting over the next 12 months from its platform customers. It also refers to the revenue Confluent expects to generate from customers using its cloud solutions over the next year, based on their usage over the past three months. So, the increase in ARR from its largest customers bodes well for the company, as it indicates a healthier revenue pipeline.

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Improved customer spending also helps Confluent deliver margin gains. The company reported a non-GAAP operating margin of 1% in the second quarter, compared with a negative 9% reading in the year-ago period. Overall, Confluent can improve both its top and bottom lines.