Is Confluent Stock a Buy After the IPO?
According to Allied Market Research, the data-as-a-service industry is expected to reach $61.4 billion in value by 2026. Thats more than 1,120% growth from $5 billion in 2018. And now that Confluent stock trades on the NASDAQ, retail investors can potentially take part in that growth. The Confluent IPO raised $828 million  or 23 million shares for $36 each on Wednesday, June 24. Shares were initially supposed to sell in the $29 to $33 range. But investors showed higher interest than anticipated. Confluent is valued at $9 billion since listing on the NASDAQ. Its up from a $4.5 billion valuation last year. The IPO was brokered by Morgan Stanley (NYSE: MS), JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS). The stock ticker is CFLT. Confluent is a Silicon Valley big-data-as-a-service company founded in 2014. It specializes in data in motion. That simply refers to data traveling between locations, say, from a phone to a laptop or a data center. A company might look at sales and marketing numbers from yesterday, last week, or last month. But Confluent wants to unlock the power of real-time data for these companies. This is exactly what Confluent provides through its cloud platform. 7 IPOs in 2021 You Cant Afford to Miss Seven monster IPOs are on our radar for this year. Get all their names  including the one with the BIGGEST profit potential  in this free report. ACCESS NOW By submitting your email address you will receive a free subscription to Money Morning and occasional special offers from Money Map Press and our affiliates. You can unsubscribe at any time, and we encourage you to read more about our privacy policy Thank you for subscribing! Check your email to access your free report. Rather than simply collecting a massive amount of old data, Confluent software is almost like a central nervous system at the core of a companys stack of apps and widgets. The companys legacy system can stream through Confluent and gather data in real time, giving it the ability to make to-the-minute decisions based on everything happening in its business. Data-in-motion will grow into a huge enterprise software trend over the next decade. Companies want it so they can support faster decision-making at all levels of business, as well as continued innovation to beat competitors. Confluent is one of the companies leading the charge in this market. Confluent is not profitable. In fact, the company has run on a loss every year since 2014. In 2019, it lost $95 million. And in 2020, it lost $229 million. Most recently, the company took a quarterly loss of $44.5 million on $77 million revenue. That loss is even greater than the same quarter in the previous year, $33.6 million. The good news is that revenue was up $22 million from $51 million. One thing to consider with these loss margins is that tech companies like Confluent need to spend a lot of money to start up. That includes both the costs of operating their technology as well as marketing it. GET OUR BEST STOCK PICKS Learn how you can get our best stock picks delivered to you each month. Click Here  GET OUR BEST STOCK PICKS Learn how you can get our best stock picks delivered to you each month. Click Here  What you want to look at in these early stages is revenue growth, which this company has. Revenue was up more than 57% year over year in 2020 and 51% in 2021. The growth is there. And Confluent delivers a product that could potentially grow in demand down the road. The data-as-a-service market is specialized enough to put Confluent in a promising position. The fact that Confluent serves large companies with complex needs is another plus. Currently the company has 2,500 customers with a 117% net retention rate. That means, for any customers it might have gained or lost since the companys founding, it has only managed to earn more revenue. Its customers include big names like Expedia Group Inc. (NASDAQ: EXPE) and Intel Corp. (NASDAQ: INTC). Additionally, about 560 of those 2,500 customers pay $100,000 or more in annual revenue to Confluent. Sixty of those customers pay $1 million or more. Confluent software came into broader use in 2020 as COVID-19 lockdowns led to more need for streaming activity. Today, the work-from-home trend persists, and the demand for data streaming software like Confluent rises. Still, a $9 billion valuation is a little high for a company that is not yet profitable and not accelerating revenue growth just yet. When an IPO stock sells higher than its expected range, you should be suspicious about its price for the first few weeks. Where peak range was expected to be $33, the offering was for $36. When it officially started on the NASDAQ, it had climbed to $45. Typical of big tech IPOs like this, the company has drawn a lot of hype. Its higher-than-expected IPO price drew in even more investors. And now, if you look at the Confluent stock price chart, you will already see the price has started to retract. It fell to a low of $42 in its first trading day. And we expect it to continue dropping over the short term, until it levels off at a reasonable price. Sit back and wait  but dont ignore Confluent stock. You can probably get this one at a bargain in a month. Get the Best Stocks in America  No Sign-Up Required  Our chief investment strategist knows that 2021 could be the start of a generational stock buying opportunity. So hes showing you which stocks you should consider buying NOW and which to sell ASAP. With his help, youll know how to be in the best position possible to potentially make a fortune next year. And you're getting it all FREE. Click here to watch now. Follow Money Morning on Facebook and Twitter.