Bernstein recently shifted its assessment of Confluent Inc (NASDAQ:CFLT) shares from Outperform to Market Perform, assigning a price target of $31.00 per share. This adjustment came in the wake of IBM's announcement on December 8th to acquire Confluent with an all-cash deal priced at $31 a share, representing a valuation near $11 billion. As per InvestingPro data, Confluent's stock was trading around $30.53 at the time, with technical indicators such as the relative strength index (RSI) signaling an overbought condition.
The acquisition offer exceeds the Fair Value as calculated by InvestingPro analysts, with Confluent’s market capitalization reported at roughly $10.88 billion. Bernstein remarked that its initial price target already factored in a premium reflective of the proposed acquisition, based on discounted cash flow analyses completed prior to IBM's bid.
In their review process, Bernstein waited several weeks post-announcement to monitor for any competing bids that might elevate the purchase price. Given that no rival offers surfaced during this period, the investment firm deemed a downgrade to Market Perform appropriate.
Additional significant developments include the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, a regulatory milestone that clears the path for the merger and enables Confluent to transition into a wholly owned subsidiary of IBM. Following the merger agreement, Citizens downgraded Confluent’s rating from Market Outperform to Market Perform, reflecting a more cautious outlook.
Conversely, Bernstein maintained a favorable stance on Confluent's stock in a separate analysis, underscoring the company's robust market position and relatively modest valuation multiples as key positives amid the acquisition discussions. The firm highlighted these factors as supporting evidence for IBM’s strategic move to acquire Confluent.
On a strategic front, Confluent formed a partnership with Workato aimed at advancing real-time data surveillance and business process management. This alliance focuses on integrating Confluent’s Streaming Agents technology with Workato’s Enterprise Model Context Protocol, potentially enhancing operational efficiencies.
Another segment of Citizens kept a Market Outperform rating, emphasizing Confluent’s growth prospects and sizeable total addressable market despite the primary downgrade. Collectively, these updates underscore the evolving perceptions and strategic activities affecting Confluent as it approaches its integration with IBM.