Bullish on data streaming but CFLT to $15 for better risk/reward
- While I believe 
CFLT chart looks good and it might go to $40 after earnings in Q1 2025. But data platform infra is getting very competitive.
- First layer of competition comes from Hyperscalers like AWS, GCP and Azure which have their own variant of stream processing. Confluent had some leverage in terms of managed offering.
- I believed that company is unique, in a strong niche but stock based compensation and dilution has always been a problem.
- With volume of data, consumption based model makes sense. I liked that billing strategy over flat subscription type model as the prior one is easier to pass cost to consumers + have some margin (fixed).
Why I'm bearish on this name lately?
- I believe redpanda acquisition by Snowflake
SNOW would impede growth for CFLT massively.
- Snowflake has a moat in data warehousing, they are trying to become all things data infrastructure.
- Streaming ingestion into snowflake is a capability which could have great synergy. While I wanted to seeCFLT acquisition by SNOW but it is not possible as of now in my opinion as confluent market cap is 10 billion+ which could hamper SNOW cash flows.
- Therefore, redpanda would be a better acquisition forSNOW but it will severly impact CFLT technical addressable market.
I would buyCFLT under $20 because their future business is going to be impacted materialistically.
CFLT chart looks good and it might go to $40 after earnings in Q1 2025. But data platform infra is getting very competitive. - First layer of competition comes from Hyperscalers like AWS, GCP and Azure which have their own variant of stream processing. Confluent had some leverage in terms of managed offering.
- I believed that company is unique, in a strong niche but stock based compensation and dilution has always been a problem.
- With volume of data, consumption based model makes sense. I liked that billing strategy over flat subscription type model as the prior one is easier to pass cost to consumers + have some margin (fixed).
Why I'm bearish on this name lately?
- I believe redpanda acquisition by Snowflake
SNOW would impede growth for CFLT massively. - Snowflake has a moat in data warehousing, they are trying to become all things data infrastructure.
- Streaming ingestion into snowflake is a capability which could have great synergy. While I wanted to see
CFLT acquisition by SNOW but it is not possible as of now in my opinion as confluent market cap is 10 billion+ which could hamper SNOW cash flows. - Therefore, redpanda would be a better acquisition for
SNOW but it will severly impact CFLT technical addressable market. I would buy
CFLT under $20 because their future business is going to be impacted materialistically. Order cancelled
- CFLT in their earning report said that they are partnering with Databricks. It will make the one sided competition even insane. This will directly fight the SNOW + CFLT
if
CFLT didn't partner with Databricks then this company would have limited upside. But with partnership it is fuel further growth for this company!
Price Target Updated to $45 per share!
Follow my initial post about
CFLT here:
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.