Confluent (CFLT) Valuation: Is the Recent 8% Pullback an Opportunity for Investors?

Confluent (CFLT) shares have trended lower over the past week, pulling back about 8% from recent levels. Investors watching the stock may be weighing the company’s revenue and earnings growth in comparison to its broader year-to-date decline.

See our latest analysis for Confluent.

Confluent’s recent 8% share price pullback is part of a broader pattern, with the stock now down nearly 24% year-to-date despite respectable annual revenue and earnings growth. Momentum has faded compared to its strong 21% share price return over the past three months. The one-year total shareholder return stands at around -30%, highlighting ongoing volatility amid shifting sentiment and valuation debate.

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Given Confluent's strong revenue and earnings growth, along with a share price trading at a nearly 30% discount to analyst targets, the question is whether investors are seeing an overlooked opportunity or if future growth is already fully accounted for.

Most Popular Narrative: 22.8% Undervalued

Compared to Confluent’s recent close at $21.52, the prevailing narrative estimates a fair value of $27.87. This creates a notable gap that has many wondering what could drive shares higher from here.

Rapid growth in real-time AI and agentic workloads is driving increased demand for enterprise-grade streaming and processing solutions. Confluent is seeing a projected 10x expansion in production AI use cases across hundreds of customers. This could accelerate subscription and platform revenue over the medium to long term as these use cases mature and proliferate.

Read the complete narrative.

Curious how aggressive growth assumptions shape this upside? The big reveal: a future profit leap and a multiple far above industry norms are incorporated into the case. Want the details behind this bold pricing power? Only the full narrative has the answers.

Result: Fair Value of $27.87 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing customer optimization and increased competition could pressure Confluent’s cloud revenue growth. This raises questions about the sustainability of its current momentum.

Find out about the key risks to this Confluent narrative.

Another View: Are Multiples Telling a Different Story?

Taking a look at Confluent’s price-to-sales ratio, it trades at 6.8x, noticeably higher than both the US Software industry average of 4.6x and the peer group at 6.6x. However, compared to its fair ratio of 7.9x, there is still room before the market would consider it fully valued. Does this premium signal lasting growth potential, or could it expose investors to a pullback if momentum fades?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Confluent Narrative

If you see the numbers differently or want to investigate for yourself, you can build your own thesis in just a few minutes. Do it your way

A great starting point for your Confluent research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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