Digital experiences have become the essence of everyday life. Consumers are more demanding than ever when it comes to technology, and the ability to bank, shop, or watch content online instantly is now the expectation.
But what makes that possible? The answer is Confluent (CFLT -1.47%), the world's leading data-streaming company. It sounds like a complex concept at face value, but don't worry -- it's rather simple.
Confluent stock has plunged 73% from its all-time high amid the broader sell-off in the tech sector, but Wall Street analysts are incredibly bullish. According to The Wall Street Journal, not a single analyst recommends selling the shares. Here's why.
Image source: Getty Images.
This is why data streaming is so powerful
Data is the nectar of modern organizations. As businesses continue to shift to the cloud, they're collecting more information than ever about their own operations and about their customers.
Before cloud computing, data would be warehoused and analyzed at a later date. But because it's now generated and collected online, it can be used to for insights in real time. That shift has substantial implications, and it's possible thanks to Confluent.
Let's consider online sports betting. It's soaring in popularity across America, and it's a great example of uses for data-streaming technology.
In-play betting is particularly popular because when it comes to live sports, a nanosecond can make all the difference.
But consider the demand placed on an online betting platform when millions of bettors are trying to retrieve live scores and live odds, which can change countless times per game. An online bookmaker needs to calculate odds, stream them to the customer, and accept bets all in a matter of seconds. It's a herculean task made possible by Confluent's technology.
What goes well with sports? Pizza. Most people think of Domino's Pizza as a pizza company (obviously), but it's really a technology company that takes a data-driven approach to everything it does. It built an entire analytics platform on Confluent, allowing franchise owners to see exactly what's happening in their stores in real time, anytime.
And the pizza chain uses Confluent to quickly adjust its marketing campaigns as it receives data across its multiple digital sales channels, improving ad efficiency and driving more revenue.
That translates to dollars for Confluent, but there are challenges
If you'd like to know how important data streaming is to large organizations, look no further than Confluent's growing customer base. The company ended 2022 with record customer acquisition in its top-spending cohorts.
The number of customers spending at least $100,000 per year reached 991, up 35% compared to the same period of 2021. That includes 133 customers spending at least $1 million annually, and Confluent noted the number of customers spending at least $5 million doubled.
The end result was $585.9 million in revenue for 2022, representing growth of 51% compared to 2021. It was a fantastic result in the face of a slowing economy, but part of the reason Confluent stock declined so much over the last 18 months is that the company isn't profitable.
It has instead focused on investing in growth, and it posted a net loss of $452 million last year. That was an improvement because it represented 77% of revenue, whereas its net loss in 2021 was 88% of revenue.
It's still too steep for investors' liking, which is why Confluent committed to cutting costs recently, including an 8% reduction to its workforce and trimming office space.
Wall Street is extremely bullish on Confluent stock
The Wall Street Journal tracks 20 analysts who cover Confluent stock, and 11 have given it the highest-possible buy rating. Of the remaining nine, one is in the overweight (bullish) camp, and eight recommend holding. Not a single analyst recommends selling.
Data streaming has a long runway ahead, and that might be one reason Wall Street is so positive. Confluent already leads the industry, and it estimates its addressable market is currently worth $60 billion. So that aforementioned $585.9 million in revenue during 2022 means that it has barely scratched the surface of this opportunity.
According to the International Data Corporation, 90% of the world's largest 1,000 companies (by market capitalization) will use data-streaming services by 2025. Over time, such services could become as widely used as cloud services across small and large businesses, purely because the bar will continue to be raised when it comes to delivering convenience to consumers.
With Confluent stock down 73% from its all-time high, this could be the ultimate long-term buying opportunity, especially if the broader market continues to rebound.
