Trade Desk appears to be expensive, trading at 57 times forward earnings estimates for 2024. However, the premium may be justified, given the rapid growth of the digital advertising industry.
The Rise of Confluent
Confluent (CFLT), a data streaming provider co-founded by the creators of Apache Kafka, is the third growth stock on my list, currently trading at around $29 per share. The AI era has resulted in increased demand for real-time data solutions, boosting Confluent’s platform growth.
This demand resulted in another strong quarter, pushing the stock to a 30.6% year-to-date gain, well ahead of the broader market.
In its recent first quarter, total revenue increased by 25% to $217.2 million. Subscription revenue grew 29% from the year-ago quarter. While the company has not reported profitability in consecutive quarters, the first quarter profit of $0.05 per share was better than the previous year’s quarter’s loss of $0.09 per share.
Talking about the long term, CFO Rohan Sivaram stated, “While streaming remains the largest driver of our cloud business with continued strong growth, our DSP products which include connect, process, and govern have shown substantially faster growth. This puts us in a stronger position to drive durable and efficient growth in the years ahead.”
Confluent expects total revenue growth of 23.3% in fiscal 2024 to $957 million, with subscription revenue accounting for 95% of that growth. By comparison, analysts predict revenue growth of 23.4% in fiscal 2024 and 24.5% in fiscal 2025. From just $0.04 in fiscal 2023, analysts forecast adjusted profits to grow to $0.21 per share in fiscal 2024, further increasing to $0.34 by fiscal 2025.
On Wall Street, Confluent stock is a “moderate buy.” Of the 28 analysts that cover the stock, 18 suggest it is a “strong buy,” two recommend a “moderate buy,” seven say it is a “hold,” and one suggests a “moderate sell.” The average target price of $33.92 is 10.7% above current levels. The Street-high target price of $40 implies an upside of 30.5% in the next 12 months.
