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Confluent (NASDAQ:CFLT) is a stock that recently popped up on my radar, and one that makes an excellent “growth at a reasonable price” buy for this year. This software company has only seen its share price rise ~20% over the past year, performing in line with the S&P 500 despite secular growth drivers that have helped to keep its growth rates near 30%. In my view, Confluent’s rally is set to continue. I’m initiating Confluent with a buy rating: especially as the stock is down ~20% from December highs near $34 (technically putting it in correction territory), I believe investors have an incredible opportunity to buy this growth stock on the cheap.
Shortly, yes, let me explain. ELF revenues have grown more than 350% since the beginning of 2019, and the company, due to its relatively small size, is expected to continue to grow at 30% for the current fiscal year 2025. ELF revenues are just about $1.3 billion, and its market cap is below $8 billion, which is far away from competitors like L’Oreal (OTCPK:LRLCF) and Estée Lauder (EL), with revenues well over the tens of billions and market caps of $180 billion and $26 billion respectively. ELF’s management has been quite emphatic in the media releases, saying that the brand’s products are quite accessible to the client base. For example, mask cosmetic average prices are just $6.5, compared to $9.5 from competitors and $20 from prestige brands. Another example is that if replacing prestige brands products with some 4 of the Holy Grails products, a business line with prestige quality but affordable pricing at e.l.f, the client could save up to $120.
The Trade Desk (NASDAQ:TTD) is a Ventura, California-based multinational technology company which provides demand-side advertising platforms- the largest of its kind in the world. The company maintains operations across real-time programmatic marketing, advertising automation tools, personalized digital content delivery, and other ad purchasing products. Through these operations, in Q3’24, TTD reported total revenues of $628.02 million, a 27.32% YoY increase, alongside an EBITDA of $129.24 million- an 83.17% YoY increase- and a free cash flow of $224.62 million- a 20.44% increase driven by rising operating and financing cash flows.
While the shares had already climbed quite a bit in the first half of 2024, they are up 170% since my coverage in June. I wanted some more quarters to pass to examine the cash flow situation and their priorities in capital allocation as it increases. With two more in and Q4 results to come out on February 3rd, I wanted to catch up ready my expectations for those results. I have adjusted my appraisal of the company, seeing the impact of their AIP boot camps on new sales, but with the elevated share price as well, I maintain my Hold rating and also maintain my note of caution about the share-based expenses.
In my thesis today, initiating coverage of this REIT for the first time, I am arguing for a buy rating, which is in line with the bullish consensus today on this stock both from analysts and the quant system. The upside factors I will discuss include macro-level demand for senior living, this firm’s growth of new properties, a strong profit margin, dividend sustainability, and low debt/equity vs peers along with stable credit ratings. The downside factors I also considered were overvaluation vs peers (P/FFO), portfolio concentration in 2 US states, and the risk that future pandemics can pose for senior living facilities.
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