What happened
Shares of Confluent (CFLT 2.54%) sank 34.6% in February, according to data from S&P Global Market Intelligence. The data-services company published its fourth-quarter earnings results on Feb. 10, and its stock lost substantial ground following the release despite sales and earnings arriving ahead of the market's expectations.
Confluent posted a non-GAAP (adjusted) loss per share of $0.19 on revenue of $119.9 million in the fourth quarter, which was significantly better than the average analyst estimate of an adjusted loss per share of $0.21 on sales of $109.8 million. Despite a loss that was significantly lower than anticipated and revenue climbing 71% year over year to deliver a big topline beat, the company's guidance appears to have spooked investors.
Image source: Getty Images.
So what
Confluent is guiding for sales in the first quarter to come in between $117 million and $119 million, which was actually ahead of the market's previous target for revenue of roughly $111 million. But the average analyst target called for a loss of $0.21 per share, while the company wound up guiding for a loss between $0.21 and $0.23 in the period.
For the full-year period, management is targeting sales between $538 million and $546 million and an adjusted loss between $0.74 and $0.82. Hitting the midpoint of that revenue target suggests annual growth of roughly 40%, which marks a significant slowdown from the 64% sales growth that the company posted in 2021. However, the bigger sticking point for many investors might be the wider-than-anticipated projected loss for the period.
Now what
Confluent stock has continued to lose ground early in March's trading. The share price is down roughly 9.5% in the month amid ongoing turbulence for growth-dependent software companies.
CFLT data by YCharts.
Coming on the heels of an adjusted loss per share of $0.86 last year, the market was likely expecting a loss this year that was significantly smaller than the range management is currently guiding for. The data-processing specialist more than doubled its spending on sales and marketing last year in order to gain new customers and boost spending from existing clients. And investors were probably hoping that more momentum for sales expansion would carry into 2022 if operating costs remain relatively high.
With investors shying away from unprofitable companies with forward-looking valuations, Confluent stock could continue to see turbulent trading despite the business' promising long-term potential. It now has a market capitalization of roughly $11.9 billion and is valued at about 22 times this year's expected sales.
