Why Confluent (CFLT) Stock Is Down Today

Radek Strnad /
2023/06/14 11:35 am EDT

What Happened:

Shares of data infrastructure software company, Confluent (NASDAQ:CFLT) fell 8.91% in the morning session after Guggenheim analyst downgraded the stock's rating from Buy to Neutral. On June 13, 2023, the company hosted its Investor Day event, highlighting its AI capabilities and how it is positioning to participate in the growing AI trend. However, guidance was mixed. The company reiterated its 2023 revenue guidance and slightly raised its gross margin guidance, which were positives. On the other hand, full year operating margin was reiterated despite the higher gross margin outlook and the company's FY24 operating margin guidance was slightly below Wall Street analysts' Consensus expectations. Lastly, the company is expected to burn cash for some time.

What is the market telling us:

Confluent's shares are very volatile and over the last year have had 79 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the stock gained 8.87% on the news that the company reported second-quarter results that exceeded analysts' revenue, operating income, and earnings per share expectations. This was a welcome sign given some missteps thus far for other SaaS companies reporting earnings. Also, cash burn increased. Despite this, revenue guidance for the next quarter and full year were in line with Consensus estimates, and the EPS outlook surpassed expectations. Overall, it was a strong quarter for the company.

Confluent is up 63.8% since the beginning of the year, and at $34.99 per share it is trading close to its 52-week high of $37.14 from June 2023. Investors who bought $1,000 worth of Confluent's shares at the IPO in June 2021 would now be looking at an investment worth $775.88.

Is now the time to buy Confluent? Access our full analysis of the earnings results here, it's free.