Confluent Inc. - CFLT
Signs of the slowdown continue
Sometimes the market has a hard time believing a company’s own forecast.
On April 30th the folks at CFLT announced what appeared to be some decent results:
Subscription growth was slowing, but not by as much as feared (or I was thinking).
Large customers, those doing over $1M a year revenues, appeared to be growing faster than smaller customers only doing $100K.
Net revenue retention (NRR) was holding up better than expected.
The company’s guidance, however, was decidedly underwhelming, as the company lopped off $100M from their subscription revenue estimate for the year and pointed to some disturbing subscription trends across the board.
The company also announced a larger increase in overall subscribers than expected (assisted by an acquisition), but then turned around and said they were no longer going to disclose that number to investors on a quarterly basis.
The market reacted negatively to the news.
On April 30th, prior to releasing their results, CFLT shares closed at $23.81, but on May 1st they would open down $3, and would eventually be down almost $5 before closing $4.50 lower on the day.
What happened next is the confusing part.
Rather than believing the company’s own management describing their slowing business trends which was the reason for lowering their subscription revenue guidance, the market decided that the selling was overdone, the guidance must be a worst-case scenario, and that a rebound was in order, and over the last 3 months have bid up the shares over 30%.
Well, that rebound is about to come undone in a big way when the market opens for trading this morning.
