Motley Fool recommends data stream mid cap Confluent to buy on the dip

Shares of mid-cap data streaming platform Confluent are currently trading near historical lows, and investors should take a look at the name, the Motley Fool believes. Wall Street analysts are bullish on the company's prospects.

Confluent is more attractive than ever, the Motley Fool argues. The company’s shares are trading near all-time lows, having dropped nearly 54% since its IPO in 2021 and 74% from its all-time high reached the same year. Yesterday, May 7, the stock closed at $20.43 per share.

Despite this decline, Wall Street remains bullish. According to MarketWatch, 25 of the 34 analysts covering the stock rate it a “buy.” Another eight rate it a “hold,” and only one has issued an “underweight” rating, the Motley Fool notes.

In the first quarter, Confluent reported a 25% year-over-year increase in total revenue to $271.1 million. The bulk of this growth was attributable to subscription revenue, which rose 26% to $261 million. The net loss per share narrowed from $0.30 to $0.20.

At the same time, Confluent lowered the upper end of its full-year subscription revenue guidance from $1.12 billion to $1.11 billion, citing macroeconomic challenges. While the downgrade seems minor, it disappointed investors, because macroeconomic headwinds are outside of the company’s control, the Motley Fool explains. On May 1, the day after its earnings release, Confluent shares dropped more than 18%.

“The short-term outlook might be uncertain for Confluent, but I would encourage investors to look a few years into the future,” writes the author of the article, Motley Fool contributor Anthony Di Pizio. The company’s current revenue represents only a small portion of its $100 billion addressable market. Data streaming is becoming increasingly important across various industries, and the “proliferation of new technologies like AI might even drive the size of that opportunity much higher in the coming years,” Di Pizio argues.

Confluent operates a leading data streaming platform. At the end of the first quarter, the company had around 6,140 customers. Among them is retail giant Walmart, which uses Confluent’s technology to get instant updates on inventory and restock shelves before popular products sell out. Users can even check whether a product is available at a specific location before visiting.

Another example is Confluent’s partnership with Google Cloud, which enables business clients to stream, connect, process, and manage data in real time across cloud and hybrid environments. The company also lists Amazon Web Services and Microsoft Azure as major clients.