Chalk up another quarterly earnings win for the technology sector. This one comes courtesy of Confluent (CFLT 2.22%). The cloud computing and data-optimization outfit handily topped its sales and earnings expectations for fiscal Q1, sending shares up to the tune of 8.8% as Wednesday's closing bell approaches.
Confluent shines in Q1
Confluent did $217 million worth of business during the three-month stretch ending in March, up 25% year over year, and beating estimates of $211.7 million. The company also swung from an adjusted per-share loss of $0.09 in the first quarter of last year to a profit of $0.05 per share this time around, topping analysts' consensus forecast of only $0.02. These results extend a lengthening, steady streak of improvement.
CFLT Revenue (Quarterly) data by YCharts
Guidance for the quarter now underway as well as for the remainder of the year, however, is just as responsible for the stock's bullish action on Wednesday. Confluent believes its Q2 top line will improve 22% year over year, while 2024's sales are expected to grow 23%. Better still, the company anticipates remaining operationally profitable for the entire year, guiding for a 2024 per-share profit of between $0.19 and $0.20.
Is there room for more?
In most cases a near-9% gain in one day is a tough act to follow, in that it invites profit-taking once the euphoria fades. This may well be what's in the cards for Confluent stock following today's surge, too.
On balance, however, there's apt to be more upside ahead than what's behind it -- and it won't necessarily first require a pullback from Wednesday's rally to realize it.
Although it's a well-followed midcap stock, Confluent hasn't exactly been a star performer of late. Shares soared following their 2021 initial public offering, but haven't budged since peeling back from that 2021 peak in 2022. Even with today's big gain, the stock remains below this past March's high. This leaves room for more immediate upside. In this vein, the current consensus price target of $35.27 is still 16% above the stock's present, post-earnings-surge price.
The underlying opportunity, though, suggests there's even more long-term upside on the table. The amount of digital data being created and consumed by the world will multiply by a factor of 10 between 2020 and 2030, according to UBS, placing an increasing amount of strain on the world's computer and cloud computing networks. Confluent is one of only a handful of companies -- and arguably one of the best -- directly addressing this challenge. It's a solid opportunity for investors who can stomach its likely continued volatility.
