Confluent Stock Chart Shows Potential Double for This Big Data Play

CFLT Stock Intriguing After 60% Rally

In my search for battered technology growth stocks with above-average price-appreciation potential, I found a mid-cap cloud enterprise software stock that looks intriguing after significant selling: Confluent Inc (NASDAQ:CFLT).

The company’s cloud software is used by companies to deliver real-time digital data to their end users.

Confluent Inc has more than 4,100 clients, including six of the biggest companies in the world. Its customers include Citigroup Inc. (NYSE:C), Expedia Group Inc (NASDAQ:EXPE), and Intel Corporation (NASDAQ:INTC). (Source: “Featured Event Streaming Case Studies,” Confluent Inc, last accessed August 15, 2022.)

Big data stocks like Confluent stock saw significant gains in 2021 that were clearly excessive and driven by momentum buying. Later, CFLT stock was one of many big data stocks left battered by the selling of technology stocks.

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In my view, the selling provides contrarian investors the opportunity to enter Confluent stock at a far lower entry point than its previously much higher prices.

Shares of Confluent Inc were trading at $94.97 in November 2021 prior to the technology stock market meltdown. CFLT stock fell as low as $16.48 in May 2022 prior to almost doubling in price.

The stock’s recent bounce is encouraging; I think there are more gains to come.

Confluent Inc ramped up its revenues by 158% from $149.8 million in 2019 to $387.9 million in 2021. (Source: “Confluent, Inc. (CFLT),” Yahoo! Finance, last accessed August 15, 2022.)

Analysts expect the company’s revenues to surge by 47% to 570.1 million this year and by 34.1% to $764.7 million in 2023. While its valuation remains high, Confluent deserves a premium revenue multiple, given its growth trajectory.

Confluent Stock Has an Attractive Risk/Reward Ratio

Confluent Inc’s below stock chart shows a rally from August 2021 to a record level in November 2021.

But as the market selling picked up, CFLT stock began a severe descent, breaking below its trendline in December 2021 and entering a downward channel to its May low of $16.48.

After drifting, Confluent stock attracted strong buying that has powered its value up by 60.4% over the last three months and 32% since the July sell-off. Shares of Confluent Inc recently broke above their trendline resistance to above their 50-day moving average at $24.92.

Chart courtesy of StockCharts.com

Confluent stock has broad institutional ownership, with about 809 institutions holding 68.5% of the outstanding shares. Moreover, Confluent Inc insiders have been taking major positions in CFLT stock. Over the last six months, insiders bought a net 24.3 million shares. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Confluent Inc presents a compelling opportunity for risk investors who are looking for a strong risk/reward trade-off. As I said earlier, Confluent stock’s recent rally is encouraging, and my view is that there are more gains to come for patient investors.

Next up is CFLT stock’s 200-day moving average of $45.99, which sits just below its first horizontal Fibonacci retracement line at $46.29. Above this is resistance at $55.46 and $64.62.