According to Allied Market Research, the data-as-a-service industry is expected to reach $61.4 billion in value by 2026. That’s more than 1,120% growth from $5 billion in 2018.

And now that Confluent stock (CFLT) trades on the Nasdaq, retail investors can potentially take part in that growth.

The Confluent IPO raised $828 million – or 23 million shares for $36 each on Wednesday, June 24. Shares were initially supposed to sell in the $29 to $33 range. But investors showed higher interest than anticipated.

Confluent is valued at $9 billion since listing on the Nasdaq. It’s up from a $4.5 billion valuation last year.

The IPO was brokered by Morgan Stanley (NYSE: MS), JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS).

The stock ticker is CFLT. But read this before you buy…

What Is Confluent?

Confluent is a Silicon Valley big-data-as-a-service company founded in 2014. It specializes in “data in motion.” That simply refers to data traveling between locations, say, from a phone to a laptop or a data center.

A company might look at sales and marketing numbers from yesterday, last week, or last month. But Confluent wants to unlock the power of real-time data for these companies. This is exactly what Confluent provides through its cloud platform.

Rather than simply collecting a massive amount of old data, Confluent software is almost like a “central nervous system” at the core of a company’s stack of apps and widgets. The company’s legacy system can “stream” through Confluent and gather data in real-time, giving it the ability to make to-the-minute decisions based on everything happening in its business.

Data-in-motion will grow into a huge enterprise software trend over the next decade. Companies want it so they can support faster decision-making at all levels of business, as well as continued innovation to beat competitors.

Confluent is one of the companies leading the charge in this market.

Is Confluent Profitable?

Confluent is not profitable. In fact, the company has run on a loss every year since 2014. In 2019, it lost $95 million. And in 2020, it lost $229 million.

Most recently, the company took a quarterly loss of $44.5 million on $77 million in revenue. That loss is even greater than the same quarter in the previous year, $33.6 million. The good news is that revenue was up $22 million from $51 million.

One thing to consider with these loss margins is that tech companies like Confluent need to spend a lot of money to start up. That includes both the costs of operating their technology as well as marketing it.

What you want to look at in these early stages is revenue growth, which this company has. Revenue was up more than 57% year over year in 2020 and 51% in 2021.

The growth is there. And Confluent delivers a product that could potentially grow in demand down the road.

But is that enough to make this stock a buy after the IPO?

When Should You Buy Confluent Stock?

The data-as-a-service market is specialized enough to put Confluent in a promising position.

The fact that Confluent serves large companies with complex needs is another plus. Currently, the company has 2,500 customers with a 117% net retention rate. That means, for any customers, it might have gained or lost since the company’s founding, it has only managed to earn more revenue.

Its customers include big names like Expedia Group Inc. (Nasdaq: EXPE) and Intel Corp. (Nasdaq: INTC). Additionally, about 560 of those 2,500 customers pay $100,000 or more in annual revenue to Confluent. Sixty of those customers pay $1 million or more.

Confluent software came into broader use in 2020 as COVID-19 lockdowns led to more need for streaming activity. Today, the work-from-home trend persists, and the demand for data streaming software like Confluent rises.

Still, a $9 billion valuation is a little high for a company that is not yet profitable and not accelerating revenue growth just yet.

When an IPO stock sells higher than its expected range, you should be suspicious about its price for the first few weeks.

Where the peak range was expected to be $33, the offering was for $36. When it officially started on the Nasdaq, it had climbed to $45.

Typical of big tech IPOs like this, the company has drawn a lot of hype. Its higher-than-expected IPO price drew in even more investors.

And now, if you look at the Confluent stock price chart, you will already see the price has started to retract. It fell to a low of $42 in its first trading day. And we expect it to continue dropping over the short term until it levels off at a reasonable price.

Sit back and wait – but don’t ignore Confluent stock. You can probably get this one at a bargain in a month.