What happened
Shares of Confluent (CFLT 0.04%) have posted impressive gains this week. The data-processing stock was up 20.8% from last week's market close as of 2:15 p.m. ET this Friday, according to data from S&P Global Market Intelligence.
Confluent is getting a boost thanks to comments from Russian and Ukrainian officials pointing to progress on a compromise that could end their conflict.
And a quarter-point interest rate hike from the Federal Reserve came in below the half-point hike that investors were concerned about. The stock also appears to have gotten a boost thanks to coverage from an analyst.
Image source: Getty Images.
So what
Wells Fargo's Michael Turrin published a note on Confluent on Tuesday maintaining an overweight rating on the stock but lowering his one-year price target from $75 per share to $55. The analyst remained bullish on the company's business. But among investors, there's been a general re-rating downward of what constitutes reasonable price-to-sales (P/S) multiples for software stocks, and that led him to reduce his price target. Despite the target change, Turrin's new target price still suggested upside of roughly 90% at the time of the note's publication.
Now what
Even with this week's big gains, Confluent stock is still down roughly 51% across 2022's trading. The company now has a market capitalization of roughly $10.1 billion and is valued at approximately 18.5 times this year's expected sales.
If Russia's invasion of Ukraine ends in the not-too-distant future, that could create bullish catalysts for Confluent and other growth stocks. However, investors shouldn't treat that outcome as a given, and the company remains a relatively high-risk investment.
The ability to process data will likely become increasingly central to successful business operations, and there's a favorable demand outlook for Confluent's services, but the stock's near-term trading will likely continue to be heavily influenced by the market's overall appetite for growth-dependent software stocks.
