Shares of Confluent (CFLT -1.56%) tumbled by 23.8% in April, according to data provided by S&P Global Market Intelligence. Investors appeared to grow increasingly concerned about how rising inflation would impact its business. Additionally, the market may have reacted negatively to an analyst lowering his price target for the data streaming company's stock toward the end of the month.
Investors pulled back from the stock market -- particularly in the tech sector -- last month as they prepared for an aggressive interest rate hike by the Federal Reserve. The Fed is trying to slow down U.S. inflation that's reached a level not seen in four decades.
In April, Federal Reserve Chairman Jerome Powell said a 50 basis point hike in the federal funds rate in May was possible, which caused some investors to panic. The Fed delivered that hike last week. While increasing interest rates from their current unusually low levels will eventually help slow down inflation, that could lead to slower economic growth as well.
That led investors to bid down stocks. The S&P 500 fell nearly 9% and the tech-heavy Nasdaq Composite fell 13% in April.
Making matters worse for Confluent shareholders in particular was a price target cut it received from Barclays analyst Raimo Lenschow.
Lenschow kept an equal-weight rating on the stock but lowered the price target from $71 to $44, in part because he thought the first quarter had been difficult for many software companies.
Confluent reported its first-quarter financial results on May 5, and its loss per share of $0.19 was still better than analysts' consensus expectation for a loss of $0.21 per share. Additionally, the company's sales of $126 million -- up 64% from the year-ago quarter -- beat analysts' consensus estimate of $118.5 million. But that wasn't enough to sway investors. Confluent's share price continued to fall after it released the results.
Part of the problem is that Confluent isn't profitable right now. Investors have lately been shying away from growth companies that aren't making money yet. That doesn't mean Confluent won't be a good long-term investment, but with the market still processing high inflation -- and with many more interest rate hikes to come as the Fed tries to drive inflation back down -- its shareholders will likely endure more volatility along the way.