Shares of Confluent (CFLT 0.70%), a data streaming and processing software company, were up nearly 9.6% in Tuesday trading.

The software company, which is built on top of open-source big data software framework Kafka, and which helps businesses connect and process data across clouds and private data centers, had sold off hard following its third-quarter earnings report back in October.

However, it appears at least one Wall Street analyst thinks that sell-off is overdone, and initiated coverage on Confluent today with an outperform rating and a $34 price target, well above the stock's $18.71 price at the close of trading yesterday.

Bernstein says, "buy Confluent"

Today, Bernstein analyst Peter Weed initiated coverage on Confluent with an outperform rating and $34 price target. In the note, the analyst cited "an attractive revenue story with tailwinds from cloud adoption," while also praising the company's competitive position. While other cloud hyperscalers also offer Kafka-based software to manage data, Confluent's position as a cloud-neutral offering is apparently attractive to customers, according to Weed.

Weed also believes the company can continue growing robustly to a $6 billion revenue run rate by 2030, which would be more than 8 times the company's trailing-12-month revenue of $732 million. That would also be about equal to the company's current market cap, which went from just below $6 billion at the start of the day to over $6.3 billion as of this writing.

Confluent's stock plunged back in October when it guided to a very tepid fourth quarter. After growing revenue an impressive 32% to $200.2 million in the third quarter, which was ahead of expectations, management only guided to $204 million to $205 million for the fourth quarter. That meager quarter-over-quarter growth would only annualize to less than 10% growth.

Management said the slowdown could largely be attributed to two specific customers, one that took its data from the cloud back in-house, and another that slowed consumption as it was in the process of being acquired. Combined, Confluent said these two customer-specific reasons caused over 50% of the expected decline in its cloud consumption-based revenue outlook for the current quarter. Management also noted some uncertainty around customers in Israel, a top 10 market for Confluent, and the potential for another government shutdown as further reasons for the anticipated slowdown in cloud consumption.

However, it appears as though the Bernstein analysts believe management's take that this off quarter can be attributed to these somewhat idiosyncratic and external factors, and not anything to do with the company's product execution or competitive advantage.

Confluent is starting to look interesting

It's always notable when a high-quality company sells off on unique one-time factors. When bad things happen to great companies, that could be a great time to look to purchase shares.

However, it's also true that cloud-based software companies tend to trade at high valuations relative to other stocks, with most pricing in continued growth and margin expansion far out into the future. After its spike today, Confluent trades around 8.6 times sales, which isn't the most expensive of the software cohort, but it's not exactly screamingly cheap either for a company still generating losses on its bottom line.

So for those looking at the cloud software sector specifically, perhaps on the outlook that interest rates will come down and cloud growth will reaccelerate, Confluent should be at the top of the watch list.

That being said, there are many cheaper, profitable stocks in other sectors that may be safer bets to consider today.