Could this forgotten tech stock bounce back in 2023?

By 2022, almost all tech stocks will have been thrown out with the bathtub, regardless of the actual quality of the business, so there are many companies that have survived. Many small, fast-growing companies still have a greenfield opportunity ahead of them, and their competitive advantage appears to be sustainable enough to weather these macroeconomic threats.

mixture (CFLT 6.19%) It’s one of those forgotten companies. Tech stocks are down 66% despite the continued execution. With shares lower and the business continuing to perform, can Confluent bounce back in 2023? Let’s go, let’s go, let’s go.

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The macro economy has not affected Confluent.

Confluent allows businesses to analyze data in real-time, which is often essential to an organization. Take it Walmart (WMT 1.23%), for example. Walmart uses the Confluent platform to process real-time input data to plan and manage inventory levels. In other words, Confluent provides fast data processing to help businesses make actionable decisions.

Since many companies rely on batch processing — processing data in batches days after it’s initially collected and stored in a data warehouse — Confluent is a breath of fresh air. This is probably why the company has seen such a high adoption rate. Not only businesses Netflix (NFLX 8.46%) to the Domino’s Pizza (DPZ -0.23%) Confluent began to rely on real-time processing, but revenue soared. In the third quarter of 2022, Confluent generated $152 million in revenue. This season is more than done. throughout the year of 2019.

While the macro economy was rough last year, it didn’t affect how much customers spend on Confluence. In Q3, the number of customers with annual spending of $100,000 continued to rocket, rising 39% year-over-year to 921.

The company’s unprofitability has also peaked in 2022, with many other businesses seeing declining profits. Confluent’s net loss remained relatively flat in the first nine months of the year, and in Q3 it had a net loss of $116 million. This is very high, and represents a margin of 76%. That said, the company saw its net loss jump 157 percent from the beginning to the end of the year, a marked improvement from 2021.

What will happen in 2023?

In the year 2022 has seen minimal impacts from a worsening macroeconomic environment, and this is unlikely to change. why? Confluent’s services are so critical that businesses are unlikely to switch back even if they need to cut budgets. After all, data processing is something that all organizations must do, and considering that Confluent can help them do this efficiently and effectively, companies are unlikely to waver. This is what investors saw in 2022, and there is nothing to suggest that will change in the new year.

One could argue that Confluent can save its customers money. If a company needs to make business decisions using data, a single day’s delay can result in business errors that can cost money.

Take Walmart for example again. If Walmart doesn’t realize they are out of a certain item in its distribution warehouse, it may not deliver that item to the store for a period of time, resulting in lost sales at multiple locations. But with Confluent, that discovery happens in real-time, allowing you to recover earlier than otherwise.

A price cut can mean a bargain.

As investors note that Confluent continues to see impressive adoption, the company has the potential to bounce back in 2023. Moreover, the company’s valuation is at an extremely attractive level. The company trades at 10.9 times sales — the lowest since it went public in 2021. Even compared to companies that provide back-end software for managing data, Confluent looks cheap.

In addition to the company’s profitability, Confluent is firing on all cylinders. In the year 2023 could be a positive year if the assessment borders on the negotiation range. Therefore, it may be a good time to buy a few stocks in a diversified portfolio to hold for the long term.