Deepwater Frontier Tech Spotlight: Confluent
- Ticker: CFLT
- Market Cap: $7B
Confluent is a software company that provides a real-time data streaming platform. This enables companies to stream, connect, process, and govern their data. What does this look like for customers? L’Oréal can integrate real-time data from distributors, co-packers, and their own inventory system into a single platform. Connecting all the data in real-time replaces a patchwork of API calls and manual file transfers, improving accuracy, performance, and cost.
Confluent was founded in 2014 by the co-creators of Apache Kafka, an open-source data streaming tool. Confluent’s flagship product, Confluent Cloud, is a managed version of open-source Kafka hosted in the cloud. The managed solution is easier to implement, use, and often carries a lower total cost of ownership, as outsourcing saves on headcount and infrastructure. Today, there are ~5,800 Confluent customers, but over 150,000 users of Apache Kafka, giving the company a long runway of potential conversions.
Confluent has made tons of recent improvements to the product and revamped their go-to-market playbook, focusing sales on growing absolute workloads rather than large upfront commitments. Additionally, the product plays an important role in many enterprise AI use cases via a process called retrieval-augmented generation (RAG). We think the combination of these initiatives is likely to accelerate growth, which has been playing out for the past several quarters.
The stock was a growth darling of 2021. After a nearly 80% decline from its peak, it has been trading between $20-$40 for nearly three years, as growth rates have come down and the multiple has bled off. We think shares are now attractive, as the changes the company has made to the product and go-to-market will allow for a long runway of 20+% growth, with the emerging AI opportunity providing additional upside.
As a reminder, the Deepwater Frontier Tech Index tracks the performance of companies that influence the future of technology, using the following thematic weights:
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