We recently compiled a list of the 10 Best Tech Stocks to Buy According to Brad Gerstner. In this article, we are going to take a look at where Confluent, Inc. (NASDAQ:CFLT) stands against the other tech stocks.
Gerstner is Bullish on Tech in 2024
On December 1, 2023, Brad Gerstner, the CEO of Altimeter Capital, appeared in an interview on CNBC where he explained that tech stocks are expected to outperform non-tech stocks in 2024. Over the past 10 years, tech earnings have compounded at almost 16% and non-tech earnings have compounded at 6%. 2023 was a rebound year for the tech industry after a downturn in 2022 due to rising interest rates. Big Tech companies and their operational efficiencies have poised them for strong growth. While inflation and interest rates will determine what goes down, companies that have invested in augmented intelligence will experience secular growth. Gerstner thinks that the spread between 16% and 6% will be a recurring trend in 2024.
Gerstner Thinks Now is the Right Time to Invest in Tech
On June 11, Brad Gerstner made another appearance on CNBC and addressed the speculation surrounding the software industry. Gerstner suggested that despite headwinds, the software industry is still valuable as companies and startups are still making deals. Gerstner believes there are three main reasons for the downward trajectory of the software industry. He thinks that CEOs and CTOs are cautious when it comes to making investments in software. Executives want a clearer picture of the AI boom before making risky investments. Moreover, interest rates are higher than expectations, due to delayed rate cuts and compressing multiples. Lastly, general uncertainty about the future has been detrimental to the growth of the software industry. Gerstner pointed out that since the software industry is trading at 20% below its ten-year average, this may be the best time to allocate stakes in software companies. You can also take a look at the best Robinhood stocks under $20.
Gerstner thinks data and databases are extremely vital to AI applications. He thinks that companies using data to power AI are far ahead of companies simply automating services. Big Tech companies have data at the forefront of all their artificial intelligence applications. You can also read our piece on the stocks hedge funds are crazy about right now.
Brad Gerstner is bullish on tech, and particularly software and AI. In Q1 2024, he initiated 6 new positions and also raised his stakes in 2 stocks, ending the quarter with a portfolio of $6.5 billion in 13F securities. With that, let’s discuss his top tech stock picks.
Our Methodology
We scanned Altimeter Capital’s Q1 portfolio and picked growth stocks from the fund’s top 13F holdings. Additionally, we’ve also added overall hedge fund sentiment, as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Note: All pricing data is as of June 28.
A team of consultants in suits, discussing the importance of stream governance for real-time data.
Confluent, Inc. (NASDAQ:CFLT)
Altimeter Capital’s Stake Value: $396,622,751
Number of Hedge Fund Holders: 37
Confluent, Inc. (NASDAQ:CFLT), a system software company, is the sixth largest holding on Brad Gerstner’s portfolio. Confluent, Inc. (NASDAQ:CFLT) specializes in data streaming and helps companies analyze data as it is generated in real time across various platforms such as mobile devices and social media.
The company became the first to commercialize Apache Kafka, an open source real time data analytics software used by companies like Uber to match drivers to passengers whenever a trip is requested. Today, Confluent, Inc. (NASDAQ:CFLT) has many high-profile clients like Expedia and Vimeo, that use its services to facilitate travel booking and video streaming on their platforms. The company continuously adds newer features to its platform to help customers manage large amounts of real time data streams and execute their core business operations.
Confluent’s (NASDAQ:CFLT) cloud revenue hit $107 million, up by 45%, accounting for the majority of its subscription revenue. Earlier this month, the company launched Build with Confluent, which helps enhance the efficacy of data streaming use cases by increasing speed. The new partner program also includes specialized software bundles that help customers develop solutions together more efficiently. Confluent, Inc. (NASDAQ:CFLT) is not limited to providing data streaming applications. The company’s Connect and Govern products, products part of its data streaming platform (DSP), are gaining momentum in the industry. The revenue growth for Govern has been the fastest for any of the products launched by Confluent, Inc. (NASDAQ:CFLT). The company expects its cloud revenue to hit $116 million, a growth rate of 39%, year-over-year, in the second quarter of 2024.
Confluent, Inc. (NASDAQ:CFLT) is part of a rapidly growing industry. According to a survey by the company, 86% of IT leaders suggest that data streaming was a priority investment for them in 2024, indicating the need for real-time data use cases and applications. Overall, Confluent, Inc. (NASDAQ:CFLT) is popular among investors. At the close of Q1 2024, 37 hedge funds held positions in the stock, with total stakes amounting to $949.63 million. The stock has surged 30% year to date and analysts’ median price target points to a further 22% upside.
Overall CFLT ranks 6th on our list of the best tech stocks to buy according to Brad Gerstner. You can visit 10 Best Tech Stocks to Buy According to Brad Gerstner to see the other tech stocks that are on hedge funds’ radar. While we acknowledge the potential of CFLT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CFLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.