11 Best Cloud Stocks to Buy According to Analysts

7. Confluent, Inc. (NASDAQ:CFLT)

Number of Hedge Fund Investors  in Q1 2024: 37

Analyst Average Share Price Target: $35.64

Upside: 36%

Confluent, Inc. (NASDAQ:CFLT) is a data focused cloud stock that enables customers to consolidate and manage their data on a singular platform. It is one of the few companies in the cloud industry that offers a data streaming platform to allow for real time data processing. This allows businesses to generate real time insights and improve their decision making. While this offers Confluent, Inc. (NASDAQ:CFLT) a lot of runway for future growth by capturing market share via the early mover advantage, in the short term, share price performance is dependent on customer acquisition, product launches, and customer retention. Therefore, Confluent, Inc. (NASDAQ:CFLT)’s shares lost a stunning 44% in November 2023 when it guided $205 million in revenue for Q4 2023. Wall Street had expected $213 million, and investors were further spooked when management shared that an online gaming company moved back to on site data processing and another customer lowered its spending as it was being acquired. Yet, as a classic illustration of the highly volatile nature of cloud stocks, Confluent, Inc. (NASDAQ:CFLT)’s shares gained 34% in February 2024 after Q4 revenue sat at $213 million to smash analyst estimates of $205 million. The firm added that it expects to become profitable in FY2024.

Confluent, Inc. (NASDAQ:CFLT)’s Q1 2024 earnings call also shared more details about its customer retention and recurring revenue with management sharing:

Customers with 100K plus in ARR grew 17% to 1,260 and continue to account for greater than 85% of our revenue. Customers with 1 million plus in ARR grew 24% to 168, reflecting the power of our network effect and customers’ continued standardization on our data streaming platform. NRR was healthy and in line with our target range of 120% to 125% for this year. Gross retention rate remained strong and was above 90%. As discussed last quarter, we expect NRR to exceed our midterm target threshold of 125% starting fiscal year 2025 as we exit the consumption transformation. RPO was $840.2 million, up 13%.