Harsh Chauhan, The Motley Fool

Fri, Jun 13, 2025, 4:15 AM5 min read

• Confluent stock has had a difficult time since late 2021, partly thanks to the business's declining growth rates.

• The stock is now trading at a reasonable valuation, and it's sitting on a massive addressable opportunity.

• Confluent's earnings growth is expected to accelerate, and that could be rewarded with healthy gains on the market over the next three years.

• 10 stocks we like better than Confluent ›

It has been just under four years since Confluent (NASDAQ: CFLT) made its stock market debut in June 2021. A look at its stock price chart will show that investors in the data streaming specialist have endured a difficult time since November of that same year.

Confluent stock was in fine form in 2021 following its initial public offering. However, like many other young tech stocks in late 2021, the stock price began a downhill run late in the year. Some of these stocks eventually recovered. In Confluent's case, the stock lost 46% of its value since its initial public offering (IPO) and 74% when compared to its all-time high.

Let's check why that has been the case and see if this cloud computing stock has the ability to regain its mojo and jump higher over the next three years.

Confluent was trading at a whopping 37 times sales in 2021, which means that it needed to maintain high growth rates to justify its rich valuation. However, its sales growth rates have been dropping over the years, as we can see from the table below.

Data source: Confluent quarterly reports.

The reduction in Confluent's top-line growth is a big reason why the stock has fallen out of investors' favor. As a result, it is now trading at just under 8 times sales, which is lower than its five-year average price-to-sales ratio of 12. Another thing worth noting is that Confluent's sales multiple is now in line with the U.S. technology sector's average sales multiple.

Buying Confluent at its current valuation could turn out to be a smart long-term move, as the company is now sitting on an added catalyst in the form of artificial intelligence (AI). Confluent's cloud-based data streaming platform is used by customers to bring data out of silos and connect it in real time to make decisions quickly.

The company's platform finds applications in multiple areas such as inventory management, fraud detection, and customer service. It's now being applied in generative AI and agentic AI applications as well, as Confluent's platform allows customers to use relevant data in real time for training large language models (LLMs) and AI agents.